Video Transcript:
Hello everyone, it’s Dale here with a new video from the recent trade series. The goal of this series is to show you how to apply everything that I’m teaching you—all the trading methods—and how I use them in real trading, so you can learn from that and use it the same way I do. What I want to show you today is a trade that I took last week on the EUR/USD, and I’m going to show it to you with the market replay function so you can see how it actually played out in real time. If you now check out the chart, this is how it looked last week. At this point, I’d like to show you how I selected the level that I was later trading.
What I saw here was that the EUR/USD was in strong selling activity, and I noticed that it stopped for a while here. So I looked into this whole trend area with the volume profile and found that there were rather heavy volumes in this small rotation where the price stopped—between this selling activity and the next one. I thought that this area was a place where sellers were adding to their short positions. As you can see on the volume profile, it’s a very important area, and I decided I wanted to trade from it. But not only because of this volume profile setup—also because there was a weekly Point of Control here. That means the heaviest volumes throughout the whole week were traded there. If you look at this gray profile on the left, it shows the volume distribution throughout the week. The heaviest volumes were right here—this is the weekly Point of Control—and it was at the same heavy volume zone I found earlier.
So we have this heavy volume zone, we have the weekly Point of Control, and there was one more thing: if I zoom out, you’ll see the price had reacted to this area before. In the past, this was a support because the price reacted here. When the price broke through that support, it turned into resistance. So, we have three setups—two volume profile setups and one price action setup. Additionally, there’s also another price action setup here—a fair value gap highlighted in red. This is the beginning of the fair value gap, and here highlighted in red is the whole gap. In a short trade scenario, I like to trade from the beginning of a fair value gap, which is from here. This is where everything aligned—all the setups came together. That’s why I selected the level here, which was at 1.1732. This blue line was the level, and for all those reasons, I wanted to go short from there.
That was the plan. But this is just part of it, because you should only enter a trade if you have a complete plan—not only for the entry but also for the stop-loss and take-profit. You need to have everything planned in advance. I usually place my stop-loss orders behind heavy volume zones. In this case, it was behind this heavy volume zone, and that’s where I placed the stop-loss. The next thing I had to determine was the take-profit. I usually like to take profit before the price reaches a heavy volume zone. So I use the volume profile to see how volumes were distributed in the area where the price was moving toward the level and look for heavy volumes there. I want to take profit before the price reaches those heavy volumes.
In this case, the first heavy volume cluster was quite far away. I usually don’t want to trade with that big of a risk-reward ratio, so I was looking for something closer. What caught my eye was this fair value gap highlighted in green. When I saw it, I thought, “Okay, the price often reacts to fair value gaps.” In a bullish scenario, it’s the beginning of the fair value gap where the price tends to react. So that’s how I determined the take-profit—the beginning of the bullish fair value gap.
Now, let me show you how the trade played out. I’ll zoom in a bit so you can see it clearly, and I’ll mark the stop-loss and take-profit lines. This was the stop-loss, this was the short trade entry, and this was the take-profit. Let’s play it out using the market replay. The price hit the level, and I entered the trade with a limit order. I usually use limit orders to enter my trades so I don’t miss any opportunities if I’m not at the computer. Usually, I am around, but I don’t want to hesitate about entering a trade—so I just use limit orders.
At this point, I was waiting for it to play out. So far, not much of a reaction. Then I was glad to see the price moving below the entry. There were two small pin bars, so everything looked good. The price was hitting this VWAP line, which could mean minor support, but I wasn’t too worried about it because it was weak. Then the price hit the trade entry again, which made me a little nervous, but that’s normal—sometimes price retests the entry multiple times, so nothing to be stressed about.
Here, it was so quick that I barely managed to move the stop-loss to the reaction point—the highest point of the reaction to my level—before the price reached the take-profit. When the price reaches around 75% of the intended take-profit, I move the stop-loss to the reaction point to secure the position. I don’t move it to break even because sometimes price retests the entry again, and I don’t want to be stopped out unnecessarily. From my experience, it’s better to secure it at the reaction point, which is the highest point of the reaction.
So I secured the position there, and soon after, the price hit the take-profit as intended. After that, the price reacted to the fair value gap, and I was really happy I exited the trade because the reaction didn’t look good at all. I was glad I took profit as planned. Fast-forwarding a bit—you can see there was another touch of the level, so if I hadn’t exited earlier, there would’ve been a second chance, but that doesn’t happen often. After that, the price reversed and went up.
What I wanted to show you in this video is the importance of proper take-profit placement. If I hadn’t taken profit here, the price would have reversed, and I’d have ended up with a losing or break-even trade instead of a nice winner. It would’ve been a shame because the entry was perfect. So yes, take-profit placement is just as important as trade entries. I know trade entries are “sexy” and fun to talk about, but take-profit and stop-loss placement are equally important.
The level I showed you today was one I also published for members of our trading course. I publish these levels daily in advance, so everyone can trade them alongside me. Here’s our members’ area—this is that day’s prediction and the short level I posted in advance so people could trade with me: 1.1732. That’s the level. If you want to join us and trade with me every day, you’re welcome to do so. Just go to my website, trader-dale.com. Click on “Trading Course and Tools” and it’ll take you to this page. Currently, I’m running a special Halloween sale, and you can get my educational and indicator packs here: the Volume Profile Pack, Order Flow Pack, VWAP Pack, and Smart Money Pack. You can get them separately or scroll down to get all four together at a discounted price until the end of the month.
Thanks for watching the video. I hope you liked it, and I’ll be looking forward to seeing you next time. Until then, happy trading.
Comments
Post a Comment