Confirming a Double-Top Reversal Setup: Swiss Franc Currency Futures
Anthony Speciale here with Hawkeye Traders. I hope you’re having a wonderful day.
In this post, we’ll delve into the Swiss Franc Futures Market using a 5-minute chart, where each candle represents 5 minutes of open market, transacted price action.
If you’re primarily a Forex trader, you might find it challenging to read volume accurately due to the decentralized nature of the Forex market.
However, the Futures market offers a more regulated environment, providing reliable volume data that can significantly enhance your trading strategies.
Why Trade Futures Instead of Forex?
Futures markets in the United States are heavily regulated, ensuring accurate and reliable volume data. This regulation is why I personally prefer trading Futures over Forex.
By examining the Futures market for both pairs you’re trading, you gain a clearer picture of volume and price action, enabling more confident trading decisions.
Identifying Key Market Movements
In this analysis, we focus on identifying a reversal and a potential double top formation. Let’s break down a specific instance from the 5-minute chart of the Swiss Franc Futures.
Analyzing Volume and Price Action
At 3:00 AM, we see strong buying volume, with the candle closing in the top 10-15% of its range. This indicates aggressive buying and suggests potential continuation.
However, subsequent candles show a different story. A larger candle closes near the top, but with lower volume, signaling weakening buying pressure.
We observe a volume climax, where buyers made a final push, but the candle closes around the 50% mark of its total range.
This suggests that if we retest this area, it might serve as a future point of failure, as the initial buying effort was not strong enough to sustain higher prices.
Recognizing a Double Top
The market falls back with low volume, attempts to recover, and pushes back up.
Despite a large candle closing near the top, the volume remains low.
This lack of supporting volume indicates a weakening buying interest, setting the stage for a potential reversal.
Ultimately, we see a double top formation, with the neckline representing the low between the two peaks.
Price breaks down, retests, and continues lower, confirming the double top pattern.
Practical Application
As a trader, you could have taken two approaches:
- Shorting at the volume climax with a stop above the candle’s high, aiming for the neckline as the target, offering a favorable risk-reward ratio.
- Shorting on the retest of the wick with significantly lower buying volume, again targeting the neckline.
Both strategies capitalize on understanding the relationship between volume and price action, essential for successful trading.
The Hawkeye Advantage
At Hawkeye Traders, we emphasize the critical relationship between volume and price action.
Our tools, such as the Hawkeye Volume Mastery Series, help you understand this relationship, making it easier to identify market aggressors and potential opportunities.
Join our training webinar to dive deeper into these concepts.
We’ll explore practical examples and show you how to apply these principles using our Hawkeye indicators on various charting platforms like TradeStation, TradingView, NinjaTrader, and MetaTrader.
Understanding volume and price action is crucial for making informed trading decisions.
By leveraging reliable volume data from the Futures market and using tools like Hawkeye, you can enhance your trading strategies and increase your chances of success.
Click the link below to join our training webinar and start mastering the relationship between volume and price action. Let’s simplify and amplify your trading together.
Thank you for your time, and I look forward to seeing you in the webinar…
Happy Trading,
Anthony Speciale
Hawkeye Traders
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