Video Transcript:
Hello everyone, it’s Dale here. In this video, I’ll show you the strongest Volume Profile levels to trade. This week, we will take a look at a couple of intraday trading levels as well as a swing trading level. So, let’s get to it. What you see before you is a chart of USD/JPY. The platform is NinjaTrader 8 with my custom-made Volume Profile and VWAP indicators. On this 30-minute chart, I want to show you two strong supports. You can see them printed here and here. The first support is at 153.76. Let me now tell you why I think this is a strong support and why I think the market will react there. First, let me show you the Volume Profile, because this is the most important thing for me. As you can see, in this strong uptrend area on the Volume Profile, there was a significant volume cluster. This represents a place where buyers were adding to their long positions before they pushed the price aggressively upwards. So we have that volume cluster here. That’s the first reason why I think this is a strong support.
The second reason is that this level is exactly at the beginning of a Fair Value Gap, highlighted in green. There’s also another, bigger one here. When Fair Value Gaps are close to each other like this one and this one, I look at it as if it were one big Fair Value Gap, and the level is exactly at the beginning of that. So that also adds strength to the level. Now let me zoom out a little bit. The third thing that adds strength to the level is that the price reacted a couple of times to this level here. It overshot the level a bit, but there were still a couple of reactions to this level or this area. That means it was a resistance in the past. When the price broke past that resistance, the resistance turned into support. So this is a newly formed support based on price action, the Volume Profile setup, and the Fair Value Gap. Now we just need to wait. We need to wait for a pullback. When the price hits this level, I’ll go long from there. I’m personally trading this with limit orders, so it’s rather simple to execute.
By the way, there was another volume cluster a little bit higher, here. Immediately after it was formed, there was a pullback and a reaction. This is how a trading volume cluster should look. There should be a pullback to it and a reaction. Again, there should be a pullback and a reaction. So that’s the first long. The second long is also based on a volume cluster. This is the level 153.25. Right here is the volume cluster. Here we have a small Fair Value Gap, and the level is exactly at the beginning of that Fair Value Gap. So that’s the reasoning behind the second long. The ideal scenario would be a pullback to the first level with a reaction, then a pullback to the second level with a reaction. That’s for USD/JPY.
The next level I want to show you is on the British pound. Here is a 30-minute chart of GBP/USD. You can notice that there was a very steep trend area, and in that trend area, a significant volume cluster was formed — this one. It looks like two small volume clusters next to each other, this one and this one. I’m trading from the beginning of the second one. The level is at 1.3543. The reason I want to trade from the higher one is that, as you can see highlighted in red, there is a Fair Value Gap, and this is the beginning of it. I think that when the price comes to this zone, the market will want to fill the gap first, and then there should be a reaction. But first, they should fill the gap. That’s why I’m interested in trading this volume cluster right here.
It looks like this might have already been tested, though. Let me draw a line here. It seems like the beginning of the first volume cluster was already tested here and here. However, the second volume bump and the beginning of the Fair Value Gap still haven’t been tested yet. I think there should be a reaction from there. So that’s for the intraday trading ideas.
Now let me switch over to my swing trading layout to show you my swing trading idea. This is a daily chart of USD/JPY. I always do my swing trading analysis on a daily chart because these are swing trades. The resistance level I want to show you is here at 156.50. It is based on a Volume Profile setup. As you can see on the Volume Profile, there was a rather heavy volume zone formed here. This place is significant because it was inside a strong rejection of higher prices. This was the rejection. So this volume cluster represents a place where sellers stepped in. They started selling, overpowered the buyers, and began this downtrend. We have information that strong and aggressive sellers were building up their short positions here. When there’s a pullback to the beginning of that heavy volume cluster, I expect a reaction because the sellers from here will want to defend this place, which is clearly important for them, as shown on the Volume Profile.
Now we just need to wait. This could take days, weeks, or even months. It doesn’t really matter. Markets have great memory. I’ll be waiting here with a limit order, and when the short gets triggered, I’ll go short. The stop for this trade will be above this candle right here because the stop needs to be behind a heavy volume zone like this one and ideally behind a swing point like this one. The take profit needs to be at least at a risk-reward ratio of one, so at least somewhere here or better. That’s the swing trade on USD/JPY.
By the way, I had another level here, this red line, which was based on a volume cluster formed in this small rotation. Unfortunately, the price missed it. This strong rejection is what the new level is based on — the reaction to that level. So I missed that trade, and I’m no longer interested in trading it. This level is now discarded. My limit order was missed by a couple of pips. So if you were wondering why I had this short level here, it’s no longer valid.
If you’re interested in learning more about Volume Profile trading, head over to my website at trader-dale.com. If you click the button that says “Trading Course & Tools” it will bring you to a page where you can browse my trading education and custom-made indicator packs. Thanks for watching the video, and I look forward to seeing you next time. Until then, happy trading.
Before I wrap up the video, I’d like to announce the winner of the contest we had last time. The prize was my custom-made Volume Profile and VWAP indicators for the TradingView platform. On your screen, you can now see the name of the winner. Congratulations. Next, I’ll run another contest for the coming week. To participate, simply leave a comment below this video on YouTube. Next week, I’ll randomly pick one person to win this set of custom-made indicators. Thanks again for watching, and I look forward to seeing you next time. Until then, happy trading.
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