Whenever markets are in a consolidation or congestion phase many traders become very, very frustrated as price action oscillates, contained within a relatively narrow range. However, such periods should be seen as presenting wonderful trading opportunities as patience will be rewarded once a firm direction is established. As I mentioned in my books, congestion phases are the spawning ground of new trends, and for a brilliant example we need look no further than the weekly chart of the USDJPY.
This pair is, of course, a bellwether for market sentiment. In other words when markets are optimistic the USDJPY will be rising as traders and investors use the YEN for funding higher yielding (and riskier) assets. When the pair falls markets are usually retreating into the USD and treasuries for safety.
2014 has been characterised with the pair trading in an extraordinarily tight range between 100.50 to the downside and 104 to the upside and all on average volume. In many ways this is similar to the congestion phase last seen in mid to late 2012, prior to the BOJ’s shock and awe tactics which sent the pair rocketing skywards, price action which was accompanied by strong and rising volumes.
For trend traders the key is patience, and for others this is a great opportunities to apply some more sophisticated option trading strategies to take advantage of this lack of direction.
By Anna Coulling
Hello,
I was in Albert Labos troop 11. I thought he was an amazing guy. However I have tried applying his ideas for years and so far things are not working out so well. In fact I am in a Dmp. But I can also see that the principles he taught work and I have to carry on with this because there is nothing else I can do. I am now retired.
My computer hard drive went bad a couple of months ago and I was wondering whether to buy a trading computer or go for a gaming computer with a high spec chip. Which computer do you use?
Kind regards
Robert McAllister.
Hi Robert – gosh that’s taking me back – yes I think we were in troops!! To be honest I can’t remember our troop number but I think we were fairly early on. As I have said in my book on Volume Price Analysis, Albert was certainly a character, but I am eternally grateful that he set me on the right trading path using volume and price, and which I have used ever since – I’m sorry to hear that you have been struggling to make it work in your own trading. If I can help in any way please just drop me a line. With regard to your question on trading computers, I have to be honest and say that in all my years of trading, I have never used anything other than a simple laptop or desktop pc – nothing fancy. I trade both fx and futures using the laptop and my Interactive Brokers account and this works perfectly. I have never had any issues with speed etc So my advice for what its worth is to simply buy a good laptop and add extra screens if required ( or a desktop ) – hope this helps and many thanks once again for getting in touch, and please do keep going with the VPA – all best wishes and many thanks again and nice to hear from another Labos student:) – kind regards Anna
Hi Anna,
I’m still reading your book I’m at the end but I also went over various earlier sections on price bars and so forth I’m getting so much out of your awesome work. I use it has a workbook going over my charts and in the last few days I’ve caught some waterfalls and buying climaxes.
After 2 pivots I draw in a box wait for a confirmed breakout w/ high volume wait for a pullback get in I use a 4 pt. stop. I wrote the hammers shooting star daddy long leg doji’s & various things on a 3 by 5 cards and refer to them during the action of the day.
With the box’s per the pivots it looks like building blocks of a structure by the end of the day.
I am trading in sim though Ninja Trader 7 have 8 too but like 7 better been trading about 20 years I want to finish reading your book then read it again.
Thank you and you rock!
Bill
Hi Bill – many thanks for getting in touch and thank you for your very kind comments which really made my day:-) Just thrilled and delighted you are enjoying reading the book and finding it helpful in your own trading. So wishing you every success and thank you once again – kind regards Anna
Your welcome Anna,
I’m glad I have a link to you when I have questions I can shoot them to you.
Bill
Hello Anna,
I do have a question about tick charts.
On my Ninja Trader tick chart the volumes do seem to be tight together in height with some small variance. How do I change the trade volume over from ‘tick volume’ to ‘trade volume’ within the same tick chart? Please.
Thankyou so much I was reading some more on your book it will take some practice executing with the timing.
Bill
Hi Bill – thanks for getting in touch and thanks for investing in my books – I always enjoy hearing from fellow traders. If you are running volume on a tick chart with Ninja/Kinetick, then yes the bars will all be the same height more or less as they display ticks and if the tick chart is 198, then the volume bar will also be 198 each time. It’s one of the many reasons I developed the tickspeedometer indicator for Ninja at Quantum Trading https://quantumtrading.com as this delivers the optimal tick chart settings, but is read with the associated volume on the time based chart. So you can apply VPA to the time based charts but trade of the non time based tick charts which many intraday traders prefer as tick charts reveal momentum which time based charts do not. Hope this helps and wishing you every success – regards Anna