Video Transcript:
Hello everyone, it’s Dale here. Today I want to show you another Trade of the Week. This time it’s going to be on NQ. I chose this specific trade because it very nicely demonstrates how exactly I trade with Volume Profile and how I use it not only for trade entries but also for stop-loss placement and take profit. So let’s check it out.
What you see before you is the NinjaTrader 8 platform with my custom-made Volume Profile and VWAP indicators. This is a 30-minute chart of NQ. On NQ, I was trading this strong uptrend. When I saw this uptrend, I used the Volume Profile like this to look into specific areas where I could trade pullbacks from. Those areas are heavy volume zones. The price likes to react to heavy volume zones. You can see the reaction, for example, to this Volume Profile zone here. There was a pullback and then a reaction. There is also this heavy volume zone, and right now the market is reacting to that one as well.
Today I want to talk about this one, this heavy volume zone that I traded and which produced a very nice result in the end. The first reason why I chose this specific level, this one at 24,700, is that there was this significant volume cluster formed within the uptrend. When you have a volume cluster within an uptrend, it means that buyers were adding to their long positions there, and that volume cluster acts as support. I like to trade from the beginning of such a volume cluster. The beginning was here. This is where the heavy volumes begin, so that was the first reason.
The second reason was that there was also the beginning of a Fair Value Gap. Fair Value Gap is a concept from Smart Money trading, and it was here. This was the Fair Value Gap, and the beginning of it was here. As you can see, this Fair Value Gap was rather large. The bigger, the better. Those were the reasons why I went long from here. As you can see, the reaction was quite spot on. The market reacted immediately and the price started to rise.
Now let me talk about how I set up the trade, including the stop-loss and take profit. Regarding the stop, I followed my own advice and placed it behind the heavy volume zone. This was the heavy volume zone the trade was based on, and my stop was placed behind it, exactly here. Not only was it behind the heavy volume zone, but it was also below this small swing low. That’s why I placed the stop there. The most important reason for placing the stop there was that it was behind the heavy volume zone, because the heavy volume zone should work as a barrier. The price should not go past it. That’s why the stop is placed behind the whole barrier zone. This whole area represents that barrier.
Regarding the take profit, it should go at the beginning of a significant volume zone. In this case, this heavy volume zone represented the first resistance standing in the way of this long trade. The beginning of that heavy volume zone was here, and that’s why the take profit was placed there. Heavy volume zones, as I mentioned, work as strong support or resistance zones. That’s why you want to place the stop behind a heavy volume zone and take profit before the price hits the next heavy volume zone, or right at its beginning, because there is a chance the price will react to it.
When the price reacted to that support and moved toward this potential resistance formed by the heavy volume zone, there was a significant chance that the price would react there. That’s why the take profit was placed here. This is a rule I follow in most of my trades. I would say in about 90% of my trades the stop goes behind a heavy volume zone and the take profit goes before the next heavy volume zone, exactly as you see here.
As you can see, the price truly reacted at the beginning of that heavy volume zone. This turned out to be the best place to exit the long trade. This is a typical example of how I trade using Volume Profile and how I use it not only to define the trade entry but also the stop-loss and the take profit.
By the way, I publish the levels that I trade in our members area. If you join us, you can get those levels as well. Let me show you. This is our members area. This is where we meet, and this is the prediction for that day where I was trading NQ. You can see the level in the intraday table at 24,700, a long level on NQ. This is where I post my predictions, and then all our members can trade those levels alongside me.
If you want to join us, go to my website trader-dale.com and click the button Trading Course and Tools. It will take you to this page. Scroll down a bit and you can enroll in one of our courses.
Thanks for watching the video. I hope you found it useful. I’ll see you next time, and until then, happy trading.
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