I agree with you about the eur/usd bull spree being short lived. i have analysed the chart [i’m a gartley man at heart as you know], and the eur/usd has just reached the 23.6% XA if using 8th may 2014 as the x point. also there is a weekly msrt [resistance line] running through where price meets the 23.6% XA suggesting a big drop quite soon…
DailyFX trading instructor Tyler Yell said in his trading lesson today that "FXCM Trading Volume on the EUR/JPY has seen an abrupt turn as price broke through resistance after a series of lower highs and lower lows. With SSI showing a greater than 2:1 ratio of short-interest, sentiment traders are favoring upside.
[B]EUR/JPY Turns Focus On Prior Resistance to Validate Upside[/B]
"Over the last month, the three largest volume days or associated on up days from the 126.08 low recorded on April 14, 2015. The price action and volume picture helps to paint a picture of just how bullish the EUR/JPY may be coming.
[B]EUR/JPY SSI Hits 12-Month Lows[/B]
“The inverse relationship that SSI has with price might point us towards a higher EURJPY. 68% of retail traders are short. An SSI value of -2.08 is the lowest SSI value we have seen since the December 2014 high.”
Great post Jason. I am long EURJPY for a few days, so great call. I took that trade on the capital flows out of the Eurobunds and the movement in oil reflecting a change in sentiment to risk.
So looking at the volume it was an easy decision to go long and target the Yen since it is a safe haven currency.
Nice work!
FxPro EURJPY D1 Mz7yn | cTrader
The volume is diverging as price continues to rise. Signalling we may get a last push we are also seeing rising volume and narrowing spreads on the up move.
I stilll think we could hit 139.40 before falling off. Let’s see how we do.
Thanks Emeraldorc, though I can’t take credit. I’m just sharing Tyler Yell’s analysis. Nice work with your EUR/JPY trade!
Thanks guys for keeping this thread alive. I have been very busy trying to get the infrastructure for my live trading room and also I will be running webinars. as well so this will be a full fledged proprietary trading house. I am also in Alpha testing phase for an algorithm that we will be forward testing shortly and it won’t be for sale but I am staying tight lipped on this one till launch.
Anyway, between analyzing the markets and setting up a prop fund I intend to get this thread back on helping traders analyze volume as one of the pioneers of the idea on babypips. Here is my take on the Euro and why I am long Euros for now.
This is a chart of the Euro Trust FXE that was set up as an ETF to track the Euro. In the currency market real volume is an issue. So the ETF which is predominantly traded by institutions and sophisticated investors is a good guide. We see a spike in volume on the 18th of March a clear indication that some one was buying the ETF on mass (Note the strong bullish spread). On the 29th March we had a gap up and another dump. This could be sellers but judging from the retrace after, we have some disguised buying. That said if we fail to open strongly on Monday then one will consider the position but I should make my target overall.
I am also trying to gauge sentiment from the large speculators in the futures market are they buying this move? Well it seems from the open interest there was certainly more involvement. Retail traders are heavily long Euro futures and are extremely long we also see a decline in open interest over the past 3 weeks we have also seen a reduction in large spec positions both long and short as price continues to rise, suggesting the market is weakening and could reverse, so we must be approaching a top. I will keep an eye on this.
If that wasn’t convincing enough that the Euro could potentially reverse and we are likely trading a top, then take a look at Crude. The Euro mirrors Crude Oil so it rises alongside. Well open interest declined massively alongside falling volume, we are also witnessing a reduction in large spec long positions and short positions with short positions now sufficiently low to potentially see a sell off in oil resume as long positions are already at a 1 year extreme. Maybe we see $65 then splash…
Well the tick volume is diverging so that says it all. I am expecting to see a test of the 61.8 Fib to complete a 5th minor wave, at the 38.2 Fib we are very close and could reverse out of that area. Either way we should correct soon.
Verdict: Staying Long, out at the first sign of danger as this a counter trend trade. FXE will be monitored closely and will be the main clue for sentiment.
My weekly preview. Enjoy!
Sticking with the Euro. Needless to say I hastily got out my Euro long waiting for the next opportunity to go long. As I sit and wait. Here is the perspective…
I did say we should see the Euro reverse as we are at a relative top… It certainly did against the Yen and Dollar the unconvincing scenario for me is the decline in Volume as price continues to fall suggesting we will see the Eur rally once more. So come Monday I will be looking to see if a long is possible. See EURUSD Daily chart below.
Keeping a close eye on the Euro trust. I see on the 15m chart (needed to see the intraday volume) some climaxing volume and an attempt by operators to start buying into the down move, that is at least what I think suggesting we could see a minor rally if anything. See FXE below.
A small glimpse into the futures market open interest data. We can see large specs continue to increase net positions despite the market falling, suggesting divergence. Also take a look at how extremely short the market is with long contracts at all time low. At these extremes a rally is almost always imminent, the divergence makes an even stronger case. See Euro Contracts at the CME.
Happy hunting guys! Stay safe and manage that risk…
The Euro recently bounced off of important volume-based support versus the US Dollar near the $1.0850 mark, and a continued hold above leaves focus on near-term resistance starting at $1.1200.
EUR/USD
[ul][li]Total Buy Volume Executed, Total Sell Volume Executed, Net Volume Executed (Buy-Sell)
[/li][li]Length of bar indicates the sum of Buy and Sell volume[/ul]
[/li]
Chart source: Prepared by David Rodriguez, Data source: FXCM Directional Real Volume Indicator
yes i agree, i think we are having a mini sell off right now and the usd will get a bit stronger, but imo price will in the next day or two resume it’s assult against the dollar [i am currently selling the aud/usd for a 50 pip target]
and oh yes whilst you’re here, what exactly is the purpose of the indicator called directional real volume, and how can we make use of it. it is confusing. sometimes we get a bullish bar, but occording to the indicator it is full of selling. i guess it would be people who are short closing out their orders…, but still i find the indicator confusing and am not sure how it is meant to be used to aid one’s trading
In that case, you may be interested in a similar real volume-based analysis performed by DailyFX strategist David Rodriguez on AUD/USD:
“The Australian Dollar has broken below important volume-based support levels near $0.7800 but has thus far held above key levels of interest in the $0.7600-0.7650 zone. $0.78 continues to mark key resistance.”
AUD/USD
[ul][li]Total Buy Volume Executed, Total Sell Volume Executed, Net Volume Executed (Buy-Sell)
[/li][li]Length of bar indicates the sum of Buy and Sell volume[/ul]
[/li]
Direction Real Volume measures the amount of currency traded. The most likely reason that you’ve noticed price action move contrary to volume is that this indicator measures retail trading volume.
Retail traders tend to fade the trend (buying dips and selling rallies) hoping the price action will stay in a range. That’s why, in a trending market, retail sentiment can be a strong contrarian indicator as shown by the Speculative Sentiment Index (SSI).
Thank you, Jason, very informative, as ever (as is David Rodriguez, of course)!
It goes without saying that just because ‘the crowd’ is net-short at a certain level it does not mean that
the currency pair will take any notice, or that we should do what everyone else is (in fact, as David
Rodriguez’s ‘Mirror Trader’ and SSI trading can show us, it is sometimes useful (though not fool-proof)
to take a contrarian or ‘counter-crowd’ approach at certain key levels)…
Personally, I find that the ‘Real Volume’ indicator gives me plenty of ammunition without looking at
other volume indicators… As they say: [I]too many chefs spoil the broth[/I] !!
Cheers.
Happy Trading.
ok thanks for the reply.
currently around 16 pips up on my aud/usd short. hoping to make it to 46 pips.
and yes, pipmehappy i think you are right that in the case of forex it is not always wise to follow the “crowd” seeing as the crowd [as a whole] is mostly wrong.
it’s funny because in most other fields in life, going with the crowd is actually the right thing to do. eg: on shows like who wants to be a millionaire usually when the audience is asked to give their opinion on an answer the answer with the most votes is the right one
Your targets are like a sniper! hehe
I believe this works more like composite volume on the market profile. Really great analysis guys. Hope you all had a great week trading.
Hi James, welcome to the thread. I am glad everyone is finding volume very useful. Great to see you here, keep contributing.
Hi Pipme, defiance, Jason and all. Thanks always for keeping the discussion alive I have been a little busy as you know my live trading room will soon be coming to life, so I have had my hands full with trading and also organizing infrastructure. I will be letting you guys know how to access it soon.
On the trading front, I finally managed to get a market profile indicator on MT4. So I have a TPO chart this means I can jump back to MT4 trading and I have copier that sends all the trades to the ECN. My investors can now benefit from that mirror. That said I have had some good trades in Cable. Preparing for a major positioning in Dollar Yen, FxPro USDJPY W1 n5Lyn | cTrader
As the chart shows 135.19 is where the next key turnaround is (The Japs certainly won’t mind a cheaper Yen. At that point providing the highs are not rejected, it will be a sell off… Notice 138.00 on the extension is also showing promise. The climatic volume at those highs suggests that the smart money are already selling to retail. 130.70 should also show a reaction for the downside. Timing is everything with this trade… FxPro USDJPY W1 05Lyn | cTrader
Hi Guys, Hope everyone is looking forward to the weekend. Some great trades this week on Sterling. Looking forward to seeing you guys visit my live trading room launching soon. It will be mainly Cable Trading but it should at least give evryone an idea into my thought process.
I will be utilizing market profiling in my trading along side volume and Fibs. It will be mainly intraday stuff, so we won’t be touching the longer time frames in the room. I run algos to trade into larger positions for my private clients that we monitor for changes in market conditions. At the moment we are long-term Bullish on Sterling to get back up to 1.7000.
That said the live room is mainly for you guys who want to get to grips with intraday trading and managing risk effectively. Love to see you experienced heads contributing too. Grab a free spot here. Coming Soon | Traders Club London.
I will posting some more charts and vids on the weekend.
Thanks Emerald!
I look forward to your ideas…You are a man worth listening to.
Ps: have a relaxing weekend!
Thanks Pip. I certainly will. It is a lovely day outside but the forecast says tomorrow is not so good. We take what we can get…
Have a relaxing weekend yourself.