Video Transcript:
Hello everyone, it’s Dale here. Welcome to the Trade of the Week video, where I’ll show you my best trade of this week. So let’s get to it. What you see before you is the NinjaTrader 8 platform with my custom-made Volume Profile and VWAP indicators, and the chart is a daily chart of USD/CAD. Today I want to show you a swing trade that I took on USD/CAD, and that’s why we are looking at the daily chart, because the daily is where I do my swing trading.
So this is the daily chart of USD/CAD, and the trade I want to show you was a short from here. The level was 1.3924, and it was a short. Let me now talk about the reasoning behind this trade. The main idea was that there was a strong sell-off on the Canadian dollar, and if you look at that sell-off with the Volume Profile, you can see that there were a couple of volume zones. I was trading this one. It wasn’t the strongest volume zone, but there were a couple of confluences there, and that’s why I was trading this volume zone even though it wasn’t the strongest one.
I was trading this heavy volume zone because volumes within a trend like this represent a place where traders were active. In this case, it was sellers who were pushing the price downwards. The level was here, not exactly at the beginning of that heavy volume zone, which is where I would normally place it. But there was also another reason why I placed the level a little bit lower, and that was this huge Fair Value Gap right here. The Fair Value Gap is a concept from Smart Money trading, and exactly at my level was the beginning of the Fair Value Gap. I like to trade from the beginning of a Fair Value Gap, and that’s why the level was exactly here.
There was also another reason, not just the volume cluster and the Fair Value Gap, but one additional thing that added strength to the level. In the past, the price was reacting in this area, here and also here. Not exactly at the level, but the reactions were in the general area around it. That means this area worked as a support in the past, and when the price broke through that support, it turned into a resistance zone. All these things combined pointed me to this resistance, and that’s why I was trading the short from there.
Now let’s talk about the stop-loss and take-profit placement, starting with the stop-loss. My stop was here at 1.414. The reason for that is that it was behind a heavy volume zone. That’s my general rule for placing a stop-loss: it should be behind a heavy volume zone. Because this heavy volume zone was the barrier I was trading, and it represented that resistance, I placed the stop behind that barrier. That’s why the stop was here.
Regarding the take-profit, you can see this blue dotted line marked as a take-profit. This only marks the place where the take-profit would be if I was trading with a risk-reward ratio of one. But I try to get more than just a one-to-one risk-reward ratio. Risk-reward one is just the minimum. I want to get more out of my trades. My actual take-profit was here, around 120 pips. There were two reasons for placing the take-profit there. The first reason was that there was a small reaction to this level in the past, which means this level worked as a resistance. When the price broke through it, that resistance turned into support. That’s reason number one why I took the profit there.
The second reason was the first deviation of the yearly VWAP. That’s this gray line here, very close to the support level I marked in black. Because it was so close, I knew there was a risk that the price would react either to that first deviation or to this support level. That’s why I took the profit there. I didn’t want to risk it and go for more.
As you can see, in the end this trade had a positive risk-reward ratio, somewhere around 1.3, which I would say is more or less ideal for this type of swing trade. That’s how the trade went. I hope you guys liked it and learned something new.
By the way, I publish these levels in advance for members of our trading course, so everyone who is a member can trade them alongside me. If you want to join us, you’re very welcome to do so. Just visit my website at trader-dale.com, and if you click Trading Course and Tools, it will take you to this page. There you can join us by purchasing one of the packs: the Volume Profile pack, Order Flow pack, VWAP pack, or Smart Money pack. You can get them separately, or scroll down a bit and get all four packs together in one discounted bundle.
That’s it for today. Thanks for watching, and I’m looking forward to seeing you next time. Until then, happy trading.
Comments
Post a Comment