https://youtu.be/77bvX1RKckA
What Is Mean Reversion?
Currencies move in a continuous cycle from overbought to oversold and back again, and this price action is perfectly described by the currency strength indicator for NinjaTrader, and at the start of the London forex trading session, we see the USD and JPY rising strongly, with the AUD falling strongly and delivering an excellent trade before the reversal begins.
Mean reversion is a financial theory stating that asset prices tend to return to their historical average (or "mean") over time after deviating significantly. It's the opposite of momentum trading (which assumes trends continue).
In practice:
If a price moves far above its average, it's "overbought" and likely to fall back.
If far below, it's "oversold" and likely to rise.
This happens due to market forces like arbitrage, supply/demand rebalancing, or psychological levels. It's most visible in ranging markets, not strong trends.
Why Mean Reversion Is Important to Forex Traders
Forex markets are ideal for mean reversion strategies because:
Ranging Behavior: Major pairs...
When a breakout from congestion occurs the first thing we study is volume as this confirms whether the breakout is genuine or false. In this video we consider the longer term outlook for gold as well as an intraday example on the gold futures contract.
https://youtu.be/qjWykb-P0IU...
https://youtu.be/xQAKuCc_pYo
It’s All Eyes on the Euro as Markets Await the PMI Data
All eyes are on the euro as markets await PMI data. Purchasing Managers' Index figures drive sentiment. Strong readings boost EUR. Weak ones pressure it lower. Traders prepare for volatility in EUR pairs. Whilst markets continue to be dominated by the pandemic, fundamental data continues with the PMI this morning for both France and Germany of which the latter is the more significant.
Why PMI Data Matters for Euro
PMI reflects the health of manufacturing and services. Above 50 signals expansion. Below indicates contraction. Eurozone data influences ECB policy expectations. Volume price analysis (VPA) spots reactions—high volume on moves confirms conviction.
VPA Insights During the Wait
Pre-release consolidation builds tension. Low volume ranges show caution. Post-data spikes reveal truth. Quantum currency strength indicator ranks EUR early. Matrix shows relational shifts. Trend Monitor aligns direction.
Trading Implications
PMI beats favor EUR longs. Misses support shorts. Wait for volume confirmation. Avoid chasing spikes. Anna Coulling's VPA approach...
https://www.youtube.com/watch?v=9cXJ892ZHv4
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Richard Wyckoff’s Three Laws Explained
Richard Wyckoff was a pioneering trader in the early 20th century. He studied markets through "tape reading"—real-time price and volume data. From this, he distilled three fundamental laws. These explain how markets move and why. They remain the foundation of modern Volume Price Analysis (VPA). Understanding them helps spot professional intent and high-probability trades.
1. The Law of Supply and Demand
Price moves based on the balance between buyers (demand) and sellers (supply).
Demand exceeds supply → price rises.
Supply exceeds demand → price falls.
Balance → price ranges sideways.
Volume confirms this. High volume on up moves shows strong demand. Low volume rallies signal weak demand—potential reversal.
2. The Law...
https://youtu.be/4jPioInlNyg
If you're looking for a volatile currency pair to trade look no further than the GBP/JPY as I take a look at where it might be heading next.
The "dragon" in trading circles (a fun metaphor for powerful, trending market momentum—often fierce and unpredictable like a Chinese dragon) has been coiling and breathing fire lately. But where is it heading next as of January 13, 2026?
Current Market Snapshot
Global equities are mixed but leaning bullish early 2026. S&P 500 and Nasdaq hover near records on AI/tech optimism, but with caution from Fed watch and geopolitical noise. Forex sees USD softening (DXY ~102-103), commodity currencies (AUD, CAD) gaining on risk-on flows, and safe-havens (JPY, CHF) quiet.
The dragon looks headed higher in risk assets short-term—continued equity grind up, USD weakness supporting commodities/gold. But coiled for potential fire-breath downside if inflation data surprises hot or risk-off triggers hit.
Volume Price Analysis (VPA) View
VPA shows sustained buying in indices—rising prices with steady (not climactic) volume = conviction,...
Trading reversals require your stop loss to be set wider to allow for the congestion phase to develop before the trend begins. So this is not for everyone, but if you have the patience, the pay off is greater as you are getting into the trend before it begins so the payout is greater. It's all about risk and returns.
https://youtu.be/AQqakclQlq4...
https://youtu.be/jXM8xgVjiB8
Mean Reversion in Currency Markets Explained
Mean reversion is a key concept in forex trading. It states that currency prices tend to return to their historical average (or "mean") after significant deviations. Extremes are temporary. Markets correct toward equilibrium. This makes mean reversion powerful in currencies—especially in ranging conditions.
Why Mean Reversion Works in Forex
Forex is relational. Currencies trade in pairs. Balance pulls prices back. No single currency dominates forever. Central banks and arbitrage maintain fair value. Most pairs spend ~70% of time ranging, not trending. This creates frequent reversion opportunities.
Volume price analysis (VPA) spots them—low volume at extremes signals fading conviction. High opposing volume confirms the turn.
How Mean Reversion Manifests
Overbought/Oversold: Currency too strong (top rankings)—sellers emerge. Price corrects lower.
Oversold: Too weak—buyers step in. Rally follows.
Relational Balance: USD extreme vs EUR—pair reverts as fundamentals align.
Quantum currency strength indicator ranks extremes live. This flags reversion setups early.
Trading Mean Reversion with VPA
Strategies:
Fade Extremes: Sell overbought, buy oversold on volume rejection.
...
https://www.youtube.com/watch?v=ZMz3llNBkeY
One of the decisions we have to make as traders is whether we prefer to trade trends, reversals or breakouts. That decision can only be made from an understanding of chart structure and having the best tools available. In this video, we explain how this can be achieved in the forex markets in particular using our proprietary currency strength indicator....
https://www.youtube.com/watch?v=MkThi9XkRIE
Combining time charts with a non time based charts such as a Renko can give day traders a huge advantage as they not only highlight smart entries and exits but will also help stay in a trend. The Renko Optimizer takes trading with a Renko chart one step further in that it automatically calculates the optimum pip value for different time frames....
