Trading commodities and futures using the market strength indicator and volume based indicators with VPA

In this video, David focuses on trading commodities and futures using the market strength indicator and volume-based indicators with VPA. In particular, he shows you how to use the market strength indicator to help you trade metals such as gold, silver, and copper, as well as oil.

00:21

Introduction to commodity market tools and indicators

00:21

The speaker introduces the topic by building on Anna’s discussion, focusing on tools, indicators, and charts used to analyse commodity markets and futures. A simple workspace setup is described, featuring real-time one-minute charts for gold (GC), silver, oil (CL), and copper (HG) contracts. The speaker also references the currency strength indicator, which visually breaks down the market into individual currency components.

01:24

Commodity strength indicator and currency relationships

01:24

The segment explains a visual tool that displays the performance of multiple commodities simultaneously, including copper, oil, silver, and gold, each represented by a different colour. Users can customise this tool by adding various commodities, indices, or currency contracts, such as the US dollar, which is important due to its typically inverse relationship with commodities. Although not perfect, this inverse correlation means that when the dollar strengthens, commodities usually weaken, and vice versa. The tool, referred to as the market strength indicator (MSI), helps traders monitor groups of commodities or other assets to assess their collective movement and the strength of trends, indicated by the steepness of the plotted lines. This makes it useful across different trading timeframes, from scalping to longer-term trend or swing trading.

03:27

Market trends and volume analysis in commodities

03:27

The video discusses the development of a trading trend observed on the one-minute time frame, coinciding with the opening of US markets, which has caused a surge in volume. Fundamental news expected in about 30 minutes is anticipated to significantly impact the market. Copper and silver contracts are experiencing notable volume increases and strong trends, while gold and oil remain relatively steady or sideways. The strongest trend is seen in copper. The indicator mentioned functions similarly to a Commodity Selection Index (CSI), signalling potential overbought or oversold conditions, which can help reversal traders identify early opportunities to capitalise on market trends.

05:02

Volume price analysis as a foundational method

05:02

The segment explains the importance of volume price analysis (VPA) as the fundamental basis for interpreting market indicators. The speaker highlights that various indicators support the initial analysis conducted through VPA. They introduce the market strength indicator, which can be applied across stocks, currency futures, and indices to monitor overall market movements. When multiple indices or assets move together, it indicates market strength, while divergence signals imbalance. The segment concludes with an example of a market breakout supported by strong volume, following a congestion phase.

06:29

Identifying buying signals with volume anomalies

06:29

The speaker explains how to identify anomalies in volume and price action, focusing on a specific example: a large down candle with strong volume is followed by an even higher-volume candle with a much smaller price spread. This unusual pattern indicates significant buying pressure despite the smaller spread, which serves as a benchmark for analysing volume strength and potential market behaviour.

07:23

The discussion continues on how this volume-price anomaly suggests either market congestion or a possible reversal, which can be exploited for early entry into a trend. Combining volume price analysis (VPA) with a market strength indicator can yield strong signals, such as identifying oversold conditions and major buying activity, which can indicate a potential buying opportunity and a trend reversal.

08:19

The speaker highlights that significant buying by major market participants can halt price declines, supported by a volatility indicator that typically signals either market congestion or reversal. This combination of volume, market strength, and volatility indicators helps traders anticipate sideways price action followed by a potential reversal, illustrating how to effectively use the market strength indicator.

08:47

VRSI indicator and volume pressure analysis

08:47

The speaker introduces the VRSI indicator, which complements the volume price analysis methodology. They explain the layout showing 1, 2, and 3-minute time frames on the MNQ (micro contract), a smaller and more accessible contract compared to the ENQ. This setup allows traders to analyse market pressure using the VRSI alongside volume price analysis.

09:57

The VRSI indicator visualises volume pressure by comparing current volume bars to preceding ones, highlighting pressure developing in the trend. Tall bars and bright colors indicate strong pressure, which is desirable in both rising and falling trends as it confirms trend strength. The indicator is used similarly to volume analysis to assess trend momentum.

11:03

The ideal scenario is rising pressure during trends, indicated by bar height and bright colours on the VRSI. The speaker notes a current example where slower time frames show significant market chop and pressure diminishing to very low levels. The 2-minute chart shows no crossover but declining pressure, signalling weakening trend momentum.

12:04

Market pressure has nearly disappeared, leading to congestion or sideways movement near a solid resistance level at 25,145. Volume bars are narrow and falling, indicating a flat market awaiting upcoming news. The VRSI’s visual nature helps traders understand this congestion phase by complementing volume price analysis.

13:04

The speaker emphasises that VRSI and volume price analysis work together to assess volume trends—whether volume is rising, falling, strengthening, or weakening. They mention that future lessons will explore anomalies in the relationships between volume and price, citing earlier examples with commodities such as copper or silver. Currently, the MNQ chart remains flat, reflecting the lack of strong pressure.

13:33

Market congestion and resistance before the news

13:33

The speaker discusses waiting for major news events and introduces various volume indicators included in the essentials package, which will soon be rebranded as the volume package. These indicators are available on platforms like TradingView and NinjaTrader. One highlighted indicator is the volume point of control.

14:01

Volume point of control and price agreement

14:01

The speaker explains the concept of price agreement in markets that have been stagnant for a long period, using the daily chart of the ES March 26 contract as an example. They highlight how the volume is very high but confined to a narrow range around the volume point of control (Vpoc), causing the market to oscillate without a clear bullish or bearish trend. This price stagnation and volume concentration are also observed in similar markets like YM and ENQ.

15:10

The discussion shifts to a 3-minute volume-based indicator that displays volume on the y-axis as a histogram, showing areas of high and low volume. Low-volume nodes indicate zones where price tends to move quickly, while high-volume areas, like the volume point of control, act as strong support or resistance, causing price congestion. The speaker emphasises that price is unlikely to move much once it reaches these high-volume regions without significant effort.

16:16

The speaker elaborates that price congestion at the volume point of control requires a catalyst, such as impactful news, to break through the high-volume area and drive the market either up or down. Knowing the location of the volume point of control is crucial for traders to anticipate where the price is likely to stall. Conversely, when the price approaches low-volume nodes, it tends to move through quickly due to minimal resistance. This volume-based insight is valuable for trading across different time frames.

17:40

VWAP indicator variations and applications

17:40

The speaker explains their customised VWAP (Volume Weighted Average Price) indicator, which is versatile and runs on multiple time frames from 15 seconds to 5 minutes. This VWAP setup includes outer envelopes set at one standard deviation. Unlike a single indicator, this tool combines five types of VWAP: the standard VWAP, moving average VWAP (MVWAP) that moves continuously through the session, anchored VWAP which can be fixed to specific points of interest such as significant lows, time VWAP, and an intra-day VWAP that works on slower time frames like daily. Users can choose any of these five options to apply VWAP according to their trading preferences. The segment also notes the presence of volume indicators displayed at the bottom of the chart.

19:17

Renko charts for noise reduction and trend clarity

19:17

The speaker explains the Reno chart feature in NinjaTrader, which converts time-based charts to tick-based charts by removing the time element. They demonstrate setting Reno to 15-second intervals, revealing an optimal brick size of two ticks for the sluggish, sideways market action observed. Reno charts reduce noise by focusing on price movements in bricks, making trends clearer. The speaker also shows how they run Reno charts with trend dots and a trend monitor, noting the market’s bullish bias despite congestion. Finally, they compare Reno charts with time-based charts, highlighting their complementary use, and reference checking trend progress in copper using the MSI indicator.

20:50

Using MSI for overbought/oversold signals in futures

20:50

The speaker explains how to interpret market conditions such as overbought and oversold using an indicator, which can be applied to futures, commodities, stocks, or a combination of these. They suggest tracking stock performance relative to an index by monitoring multiple securities simultaneously. The session concludes with a reminder about a 20% discount offer, instructions on how to apply it, and appreciation for the audience’s participation. The presenter then hands over to Anna for final remarks, who encourages viewers to stay engaged.

22:20

Oil price outlook and geopolitical considerations

22:20

The speaker discusses the oil price situation, indicating that developments with Iran are inevitable rather than potential. They express hope that any resulting confrontation will be resolved swiftly and conclude by thanking the audience and wishing them a great trading day.