Video Transcript:
Hello everyone, it’s Dale here. Welcome to this video from the Trade of the Week series. In these videos, I walk you through my trades from A to Z exactly as I was trading them, so you can see how I apply everything that I teach in my other videos and in my courses. So let’s get to it. Today, I’d like to talk about a trade that I took on USD/CAD. What you see before you is a 30-minute chart of USD/CAD on the NinjaTrader 8 platform. What I want to show you here is a trade. It was a short trade. This red line here was my short level, and now I’d like to talk about the reasoning behind the trade entry.
As you can see, there was a rather strong sell-off a couple of days ago, and that trade was based on that sell-off. When there is trend activity like this, what I like to do is use my flexible volume profile to look for significant volume clusters to trade pullbacks to. If you look at this recent trend activity, there was a significant volume cluster right here, and I took a pullback to it and went short from there. This one was a winner, but what I want to talk about today is this volume cluster, the second one in a row. If you look at the volumes, it looks even stronger in my opinion. That was reason number one: this heavy volume cluster within the trend. Those volume clusters represent places where sellers were active as they were pushing the price downwards, and price tends to react to those heavy volume zones. That’s why I trade pullbacks to them. So that was the first reason, this volume cluster here.
Another reason why I went short from this level was that there was a fair value gap right here. Let me highlight it. This was a fair value gap from Smart Money Concepts, and I like to use it together with my volume profile setups. When there is a bearish scenario with a fair value gap, I like to trade from the beginning of the fair value gap, which is right here, exactly at that short level, as you can see. So that was the second reason why I went short from this level.
Let me now talk about the stop-loss placement for this trade. The short level was here, and regarding the stop, it always needs to go behind a significant barrier. In most cases, that significant barrier is a heavy volume zone. If you look at this heavy volume zone, that’s the barrier, and the stop needs to go behind it because that barrier should protect my trade. That’s why my stop was placed here. The stop was behind that heavy volume barrier, and there was also a small swing point here, so I placed the stop at the top of that swing point.
In the evening, the level got hit, and at that time I had to place my take profit. I always place my take profit with a risk-reward ratio greater than one. In this trade, I actually planned to get a little bit more out of it. I usually look for some support where I exit my short trade. In this case, I was looking at the first deviation of the weekly VWAP. So in the evening, when I went to sleep, I placed my take profit here, where the first deviation was, and then I went to sleep.
During the night, the first deviation of the VWAP moved higher. So that take-profit placement no longer made much sense because the first deviation was already higher, and the price had already made a small reaction to it. I then had to look for a new place, a new support, to exit my trade. When I came back to the computer in the morning, somewhere around here the price was already dropping, and at that time I had to decide whether to move the take profit or keep it where it was.
At that point, I noticed there was an extremely weak high. Let me show you. There was this weak high and also this weak high. What I teach in my courses and what I always keep in mind is that price likes to test weak highs and weak lows because there is usually a lot of liquidity above or below those places. Price often likes to test at least one pip above weak highs. So when I came to the computer in the morning and saw those weak highs, I was afraid that price would want to test above them.
Normally, I would exit the trade at the VWAP here, but because I was concerned that price might reverse and test those weak highs, I exited the trade earlier. I exited it at the original take-profit level somewhere around here, and that was it. As you can see, price actually made it to the VWAP, went a bit lower, and then tested the weak highs. This is exactly what I was concerned about. That’s how the trade played out. It wasn’t an ideal trade, but markets never move exactly the way you want them to, so you need to work with what you get.
I hope you found this video useful. By the way, I publish all the levels that I trade for our members in the members area as well. Let me show you quickly. This is our members area, and this is the level prediction for that day. That was USD/CAD, with a new level at 1.3858. The lower level I mentioned was 1.3833 as well. If you want to join us and trade alongside me every day, you’re very welcome to do so. Just visit my website at trader-dale.com and click on Trading Courses and Tools. There you can browse my trading education and indicator packs. You can join by getting one of those packs, or you can get all of them together at the bottom of the page for a discounted price. Thanks for watching the video. I’ll see you next time, and until then, happy trading.
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