How Cumulative Delta Saved My A$$!

Video Transcript:

Hello everyone, it’s Dale here. Welcome to the next video from the recent trades section. Today, I’d like to talk about a trade on USD/JPY that I took yesterday. I think it was a pretty interesting trade, so let’s check it out.

All right, so what you see before you is the NinjaTrader 8 platform, and this is USD/JPY on a 30-minute chart. What you see here is how the chart looked when I was doing the analysis. First, let me tell you what the trade was based on.

Let me use the Volume Profile here and show you how the volumes were distributed in this uptrend zone. What caught my eye was this volume cluster that formed within the uptrend. This blue line marked the beginning of that heavy volume zone, which acted as a support level I wanted to trade. This support was based on the fact that buyers were active here, adding to their long positions as they pushed the price upwards. It was based on this volume cluster and also on the fact that, in the past, the price had reacted to this zone multiple times. That means it previously worked as resistance, and when the price broke through that resistance, it turned into support.

This trade was a combination of two setups. One was the Volume Profile setup, and the other was the Price Action setup—where resistance becomes support. This pointed me to this long trade level. I published this level in the members’ area so all members could see it and trade along with me.

Let me show you real quick—this is the members’ area. Here’s the post from yesterday, and this is the level: USD/JPY 150.10. I included the chart so you could see how the level looked before the price actually hit it and started reacting.

My stop loss was below this candle—this was the stop-loss line. The main reason for placing the stop loss there was that it was behind a heavy volume zone and also below the low of this large candle. That’s why I had the stop loss in that position.

Now let me show you what happened. The price went against me quite a lot, as you can see here. I almost got stopped out. Then, there was a massive reaction.

Here’s something important I want to talk about. When the price was dropping, I must admit I was pretty nervous. There were huge volumes here, and I thought I would probably get stopped out. Then, suddenly, the price turned and went back to breakeven. It stayed around breakeven, which made me think—should I quit this trade? I had already been lucky to avoid getting stopped out and now had the chance to exit at breakeven. At that moment, I didn’t know what would happen next—I only knew I had been lucky.

However, here’s what made me stay in the trade. I noticed a divergence on the Cumulative Delta in the Order Flow software. Let me show you, because this was the key reason I held onto the trade.

What you see here is my Order Flow layout. This is Order Flow on futures, so it’s reversed—when forex moves up, futures move down. But aside from that, the charts move in perfect correlation, just in opposite directions.

Now, let me go full screen so you can see it better. The top chart is the price chart (one-minute chart), and the bottom chart is Cumulative Delta. This blue line represents the level. On forex, it was a long setup, while on futures, it was a short setup, but it was the same level.

Here’s what happened: the price was moving toward the level and shooting past it, meaning the price was rising. At the same time, look at what the Cumulative Delta was doing—it was dropping. That told me that even though the price was moving up, sellers were actually entering short positions. Selling pressure was increasing. There was a huge divergence between price and Delta, which made me confident to stay in the trade because price tends to follow Delta. As you can see here, that’s exactly what happened.

So, it was the Cumulative Delta that helped me, and because of that, I was able to take full profit from this trade. Now, let me switch back to the forex chart and show you where my take profit was.

Again, this was the volume cluster that my long trade was based on. This was the long entry, this was the stop loss, and the take profit was based on a heavy volume zone—this heavy volume zone right here. I took my profit at this point. At the time, I had no idea the price would shoot up so strongly afterward. I was happy with my exit because I had almost been stopped out, but thanks to the Cumulative Delta, I had the confidence to hold on and let the trade reach my take profit.

Later, I took a short trade on USD/JPY. I managed to catch the high and bank on the entire sell-off, but I’ll cover that in another video. In this one, I just wanted to talk about the long trade from here.

All right, that’s about it! I hope you liked the analysis. If you’re interested in learning more about Volume Profile trading, head over to my website at trader-dale.com. If you click on “Trading Course and Tools” it will take you to a page where you can browse my trading education and custom-made trading tools.

There are three packs—the Volume Profile Pack, the Order Flow Pack, and the VWAP Pack. If you scroll down, you’ll also find a Combo Pack, where you can get all three at a discounted price.

And if you want to trade alongside me and other prop traders in a live trading room every day, I recommend clicking the button labeled “FTA,” which stands for Funded Trader Academy. There, you can book a one-on-one call, and we’ll walk you through the academy so you can decide if it’s right for you.

All right, that’s it! Thanks for watching, and I’ll see you next time. Until then, happy trading!