Video Transcript:
Hello everyone, it’s Dale here. In this video, I’ll show you my all-time favorite number one Volume Profile setup. I’ve been trading for around 16 years now, and most of that time using Volume Profile. Over the years, my Volume Profile strategy has been changing little by little, but what I’m going to show you now is what has crystallized over time up to today and what is currently my most trusted and favorite Volume Profile strategy. Let’s get to it.
What you need to see on the chart and by the way, this works with all time frames and all trading instruments. I prefer a 30-minute time frame and Forex, but you can use this on anything you want. The bullish scenario goes like this. You need to see a strong trend, and within that trend, you need to see a significant heavy volume zone. Let’s say that the heavy volume zone is right here in the middle of the trend. You also need to see that the price was reacting to this level before, something like this. This is what you need to see, and what this is telling you is that this level was a resistance in the past because the price made a reaction to that level before.
Then the price went past that level, past that resistance, creating that heavy volume zone or heavy volume cluster. After that, you just need to wait for a pullback to that level again. This level turned from resistance into new support at the time when the price broke past it. This is the new support, and that’s the support you want to trade. You wait for the pullback, and when the price hits the support, you go long. This is how it is supposed to look.
There are two conditions. The first condition is that a heavy volume zone formed within a trend. The second condition is that there was a strong reaction to that level in the past where the heavy volumes were. This level was a resistance that turned into support, and you trade that support. That’s the bullish scenario.
The bearish scenario is the same, just reversed. You need to see a strong downtrend with heavy volumes formed within the downtrend. Let’s say the heavy volumes were formed here. You also need to see that the price was reacting to this place in the past, something like this. This tells you that this level was a support in the past because the price reacted to it before. Then the price broke past that support, creating those heavy volumes. When the price broke past the support, the support turned into resistance. This is what you need to see on the chart. Then you wait for a pullback, and if it occurs, you go short from that resistance. That’s the bearish scenario.
Now let me show you a couple of examples on a real chart. In this example, there’s a bearish scenario. You can see a strong downtrend here, and within that downtrend, there’s a significant heavy volume zone. Here’s an important thing: you need to use a Volume Profile that can look into specific areas of the chart. I call it a Flexible Volume Profile. It’s one of the profiles I developed, and you can get it from my website. It’s important to use a flexible profile so you can look only into the trend area. If you used daily or weekly Volume Profiles, they would also show volumes you’re not interested in, because you only care about the volumes that formed within the trend zone.
Back to the example, here is the trend with a significant volume zone, and here is the place where the price reacted to that level in the past. I like to place the level, as you can see by the blue line here, at the beginning of the heavy volume zone. This is the beginning of that heavy volume zone, and this is the resistance. Before it became a resistance, it was a support, because the price made a strong reaction to this area in the past. Then the price broke past the support, creating those heavy volumes, and the level became a resistance. I place the level at the beginning of the heavy volume zone, wait for the pullback, and go short from there. That’s the bearish scenario.
Now let me show you the bullish scenario. Here you have an uptrend, and you use the Flexible Volume Profile over the uptrend, looking only into this specific area. As you can see, there are many volume clusters, but which one do you pick? You want to trade the volume cluster that has the confluence I showed you, where the price was reacting in the past. Here we have two reactions, which is even better than one. These reactions tell us that this level was a resistance in the past, or at least somewhere around this general area, and then it became a support. We have a heavy volume cluster around the same place where that resistance was. You simply wait for the pullback. It doesn’t really matter if it takes a couple of days markets have very good memory. When the pullback comes, you go long from there.
In this next case, we again have a bearish scenario. There is a downtrend, and when you apply the Volume Profile to that downtrend zone, the volume cluster clearly stands out. The level is at the beginning of that volume cluster. If you look here, the price was reacting to that level in the past. In this case, there were multiple reactions, but they weren’t very strong. This setup is still valid even if the support was weaker like this. It still turns into resistance and is still tradable. Personally, I prefer stronger reactions like in the previous examples, but I still take trades like this. When you see the volume cluster and the price reacting to the level, you draw the level, wait for the pullback, and go short from there.
Here is another example, a very nice bullish scenario. There’s an uptrend zone, and notice that I only used the Volume Profile over this narrow area of the chart. This is the heavy volume zone formed within the uptrend. If you look to the left, you can see that this level or zone worked as a resistance because the price made a strong reaction to it. It was a resistance that later turned into a support. You wait for the pullback and go long from the beginning of that volume cluster.
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