Video Transcript:
Hello everyone, it’s Dale here, and in this video I’d like to show you a trade which I took recently on EUR/USD. It was quite a quick in-and-out trade, and let me now show you how it went from A to Z. What you see before you is the NinjaTrader 8 platform with my custom-made Volume Profile and VWAP indicators, and the chart is a 30-minute chart of EUR/USD. I was trading based on this uptrend right here. When there’s a trend like this, what I like to do is trade from significant volume zones.
The trade that I want to show you here was based on this particular heavy volume cluster. A heavy volume cluster like this represents a place where buyers were active, where buyers were adding to their long positions as they were pushing the price upwards. When there’s a pullback to those volume clusters, the price is supposed to react to them. For example, here you can see this volume cluster, the price pulls back to it, and then there’s a reaction. This is how this setup is supposed to look.
What I want to show you here is this volume cluster and how I was trading it. The blue line you see here was my trade entry, and as you can see, it was at the beginning of that volume cluster. I prefer to trade from the beginning of the volume cluster. In this case, there was also a nice confluence with a Fair Value Gap right here. This Fair Value Gap is a concept from Smart Money, which I like to combine with Volume Profile. So we had the Fair Value Gap, the beginning of that heavy volume zone, and also the weekly VWAP very close to my long level. I count this as a confluence as well.
That’s why I had this long level here. When the price hit my level, I entered with a limit order. In this case, the price went a little bit lower, overshot the level slightly, hit the VWAP line, and then made the reaction. My stop loss for this trade was here, this red line. The reason is that I prefer to place my stop behind a barrier. Most of the time, that barrier is a heavy volume zone, like this one. The trade entry was at the beginning of that heavy volume zone, and the stop was behind that heavy volume zone.
I really like to use heavy volume zones as support and resistance zones, and also as places for stop losses and take profits. This was the stop. Regarding the trade exit, what I always want to do is quit my trades at the beginning of a barrier. In this case, it was the beginning of a barrier formed by a heavy volume zone. First this one, and then this one. That’s why I wanted to quit the trade there, because there was a chance that the price would want to react to the beginning of that heavy volume zone, just like in this example where the price reacted to the beginning of the volume cluster.
That’s why the take profit was placed here, at the beginning of this heavy volume zone. At that time, I also thought there might be the beginning of a Fair Value Gap here, but it wasn’t. The price made a quick rejection and hit that level, so no Fair Value Gap was formed. Even so, this was the reason for the take profit placement. This trade had a slightly positive risk-reward ratio, meaning a risk-reward ratio greater than one.
That’s how the trade went. I hope you guys found this useful and interesting. If you would like to join us and trade these levels alongside me every day, you are very welcome to do so. Just visit my website at trader-dale.com and click the button that says “Trading Course and Tools” It will take you to the page where you can browse my trading courses. Thanks for watching, and I’ll see you next time. Until then, happy trading.
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