Volatility and the crossover session

Volatility and the crossover session

The crossover from one session to another is a dangerous time for forex traders and an extremely profitable one for the market makers. Why? Watch the video to discover why and what you are likely to see at every such period of the trading day, particularly in the Far East Asis to London crossover and later when the US markets open. Note the importance of having the volatility indicator from Quantum Trading which triggers in real-time and gives an instant warning of volatility in the market.

The indicator works on average true range and its power lies in forecasting what is likely to happen next which is either congestion, or a full reversal in trend.

00:15

Introduction and currency array overview

00:15

The speaker greets the audience warmly and mentions some technical difficulties with audio. They then begin discussing their experience monitoring the currency pair pound-yen, noting that it has moved over a hundred pips during the past hour.

00:47

Using the currency array indicator

00:47

The speaker discusses the early activity in the pound market, noting significant pound buying due to various ongoing factors. They emphasize the usefulness of the ‘array’ indicator, which provides extensive information including global sentiment and currency positions. The array shows widespread buying of the pound across multiple timeframes. Additionally, there has been notable selling of the Canadian dollar recently, influenced in part by developments in the oil market.

01:38

UK retail sales and oil impact

01:38

The segment discusses recent developments in the oil market and UK retail sales data. Despite weaker-than-expected retail sales, the pound has strengthened, illustrating a common market dynamic where negative news can lead to positive reactions if the outcome is less severe than anticipated. This pattern of interpreting and reacting to fundamental news is expected to continue across markets in the coming months.

02:41

Market reactions to bad news

02:41

The speaker discusses market reactions, emphasizing that while the news is not good, it is less severe than feared. They highlight the importance of understanding market behavior during global economic turmoil, noting that markets respond to the relativity of news rather than simply rising on good news and falling on bad.

03:09

Forex Factory trend analysis

03:09

The speaker explains how Forex Factory provides trend context through icons on the histogram, showing currency pairs like GBP/NZD and GBP/CNH at varying strengths. The platform highlights overbought and oversold levels using bracket colors, with darker colors indicating approach to inflection points and brighter colors signaling arrival. This information guides traders to analyze volume, price action, support, resistance, and supply levels on charts. The discussion transitions to viewing multiple timeframes on the currency chart, specifically GBP/NZD, noting the London market open at 8:00.

04:31

Volatility index (VIX) explained

04:31

The VIX index is currently higher than last night, trading around 66.7, indicating a slow upward trend within a congested range. The market is fragile, and the VIX serves as a measure of market fear by reflecting the balance of puts and options. A rising VIX typically corresponds with falling equities, while a falling VIX suggests market optimism. Monitoring the VIX intraday provides insight into market sentiment and panic levels. Meanwhile, the UK markets have opened with significant volatility, and attention is on the upcoming Bank of England announcement.

05:38

Session crossovers and volatility

05:38

The segment explains the significance of session crossovers, particularly the one at 8 o’clock, as moments of increased volatility in the market. Traders often experience sudden price movements and are prone to getting trapped due to emotional reactions like fear of missing out. These conditions create opportunities for market makers to reverse positions and capitalize on less aware traders. Viewers are encouraged to understand session crossovers to better navigate these volatile periods.

06:39

Volume analysis and market timing

06:39

The video discusses recent market volatility and sideways price action, highlighting a significant increase in buying volume during a specific candle. It explains the benefit of using NinjaTrader for real-time volume data tied to local geographic regions, noting the differences in volume during various market sessions such as Far East Asia, Europe, and London. The speaker points out that typically, London sees a volume surge when its market opens, but anomalies like last week’s unusual volume patterns should prompt further investigation. The use of a 15-second chart is mentioned as a quick way to anticipate market moves before switching to slower time frames.

08:06

Trend monitor and market confidence

08:06

The speaker discusses using a trend monitor tool across various markets and timeframes to build confidence in holding trading positions. The tool helps identify volatility triggers and trend strength, particularly during market pullbacks and congestion phases. Multiple timeframes show the progression of market movements, with current indicators turning bullish as confirmed by consistent blue signals without transitional colors. The trend monitor aids traders in managing the difficulty of maintaining positions amid market reversals, illustrated by examples of trend transitions and the presence of strong buying signals across several intraday intervals.

09:59

Currency strength and reversals

09:59

The discussion focuses on currency pairs involving the Japanese yen, which is currently weakening sharply, creating strong trading opportunities. There is a variety of choices including the yen’s cross pairs and the British pound (cable), which was previously strong. Attention is given to the Canadian dollar, which has reversed from heavy selling to strong buying, indicating potential early entry points on reversals and extremes. Commodity-linked currencies like the New Zealand and Australian dollars are also strengthening, influenced partly by a declining VIX index, signaling reduced market volatility.

11:17

Sentiment and US futures overview

11:17

The speaker discusses the current market trend across different timeframes, noting a bearish sentiment that is fluctuating but not dramatically changing. They mention monitoring the ‘foot sees’ indicator, which has become less volatile and is slightly down but stable for now.

11:45

Attention shifts to US indices futures, specifically the Nasdaq five-minute chart and daily charts. The speaker warns that volume profiles are currently unreliable due to frequent market halts triggered by large price moves exceeding 7%, causing irregular trading activity.

12:20

They explain that daily volume data is distorted because of market breakers activating during volatile conditions, making daily chart readings temporarily meaningless. The market is attempting a slight rally but also showing signs of weakness, reflecting uncertainty in price action.

12:47

The price action is characterized by pushes upward followed by quick collapses, trading within a narrow range. The market attempts bearish moves but lacks sustained momentum. The speaker then reviews the ‘cable’ (GBP/USD) chart, noting volatility candles and waiting for clearer signals with decent volume before making trading decisions.

13:32

Volatility triggers and BOE outlook

13:32

The discussion begins with a mention of a volatility trigger at the market open related to a crossover on a 30-minute chart. The speaker then shifts focus to Anna and notes the upcoming Bank of England (BOE) announcement later in the day. It is expected to be unsurprising, with forecasters predicting a neutral outcome (nil nil 9 score). The speaker suggests that many fundamental data points will become less significant in the coming months due to current conditions.

By Anna Coulling – creator of volume price analysis