Video Transcript:
When the market is trending, you don’t want to chase the move. You want to wait for the pullback into the right area. In this video, I’ll show you how I use Volume Profile to find those areas. I’ll also show you my favorite price action combo that makes the setup even stronger. So, let’s get to it.
It is called the Trend Setup. It’s a very original name because you use this setup when there’s a trend. The concrete steps are: first, you look for a strong trend, like in the picture. There is a strong trend. What you do next is use the flexible Volume Profile to identify the heaviest volume clusters within the trend. So, you use the flexible Volume Profile over the whole trend area and look for volume clusters. In other words, sort of bumps on the Volume Profile, like this one, right? This volume cluster, this bump on the Volume Profile. What this bump means is activity from the big guys, accumulation of volumes from the big guys. So, in this situation, aggressive buyers were pushing the price upwards. Then big trading institutions were adding to their longs there, and then the uptrend continued. This gives us information that strong institutional buyers were interested in placing their long orders there. This is a very important zone for them, and they placed a lot of their positions there. So, the next step you do is draw a line from the heaviest volume peak and wait for a pullback. That’s basically the same as with the Volume Accumulation Setup, right? So, you identify the place where the volumes were heaviest. You draw a line and wait for the pullback. When your line gets hit, you enter a trade. You enter a trade which is in the direction of the trend. So, in this case, this is an uptrend, so you enter long. The logic is that those guys, those strong buyers, defend their positions, defend this zone, which is clearly very important for them, and they push the price upwards. All right, so that’s about the Trend Setup. Let me now show you a couple of examples. So, in here, there was a strong downtrend. Aggressive sellers were pushing the price downwards. And within this downtrend, there was a significant volume cluster, a significant volume bump. You can tell that it really stands out of the profile, right? You’ll get the feeling for it, but this one really stands out. And the heaviest volume peak is in here. So, you draw the line there and wait for the pullback. Once the price hits it, you go short. That was a downtrend, so you go short right in the direction of the trend.
Now another example on CHF/JPY. In here, there was a strong uptrend. Now, in this picture, I don’t have the flexible Volume Profile. I have the fixed Volume Profile, this one, which shows how volumes were distributed throughout the whole week. In this case, it doesn’t really matter because the price was trending the whole week. So, if I was using the flexible profile, I would still use it for this whole area, right? So, anyway, this is a significant volume cluster that got created within the trend. So, you draw the line there. You wait for the pullback and go long from there. Now, there was also another significant volume cluster. If you look at the profile, then it was this one. Those volumes were created in here, and it already got tested right there. This was the reaction. So this one is spent. You only want to trade each level once, right? This one is spent. And also, there is one more in here, and this is also a viable level to trade. This one is not spent yet. So, what you want to do in a case like that is skip this one because this one is already tested. Then you go long from this one, from here, and then when the price drops even more, you enter another trade and go long from there, right?
Now another example. This is AUD/JPY. Again, there was a downtrend, and within this downtrend, there was this significant volume cluster created in it. So, what you do is wait for the pullback. When the price hits it, you go short from there. This is the reaction you’re waiting for, right? By the way, there is also the Volume Accumulation Setup, those massive volumes from this rotation which took place before this strong sell-off. So, another viable level to trade from would be here. All right, so that’s the Trend Setup as well as the Volume Accumulation Setup.
Now let me show you another example where you can see both those setups. There was a trend right there, and within that trend, there was this very nice and clearly visible volume cluster, right? Those volumes got created in here. So, what we want to do is go long from there. By the way, those lines which you can see there, those green lines, those two, this is a pretty handy tool which I have. That tool basically draws my intraday and swing trading levels into your trading platform. So, my members of my trading course use that. Whenever I publish new trading levels, those levels automatically show in their trading platform, like that line shows there, and also the value of the level, right? Anyway, back to the setup. This was the Trend Setup. This was the reaction, but there was also the Volume Accumulation Setup, those massive volumes accumulated in this rotation from which this strong uptrend started. So, what you do is first go long from there. Then you wait for another pullback to this level and go long from there. All right, this is the Trend Setup. This is the Volume Accumulation Setup. Anyway, however you call it, you basically always trade from the heavy volume areas, right? That’s the main idea behind those two setups. Heavy volume area, wait for a pullback, and enter your trade.
Now, what I wanted to show you as well is a combo of two trading setups. One is the Trend Setup. The other one is a sort of price action setup. How this works is that first, you look for the Trend Setup, like in here. That was an uptrend, and this is a significant volume cluster created within the uptrend, right? So, this is the support. This is the level you want to trade longs from. Now, the second setup, the price action setup, shows that the price reacted to this zone in the past really sharply in here, this rejection. Now, this tells us that in the past, this was a resistance. But when the price went past the resistance in here, the resistance got breached, and it became a support. When a resistance gets breached, it becomes a support. This is the old price action setup. It is not my invention, but I like to use it exactly like in here, as a combo of a volume-based setup, the Trend Setup, and this price action setup.
Let me show you a couple more examples of it. So, in here, there was a downtrend, and within that downtrend, there was this significant volume area, this significant volume cluster, right? So that means you have a short there, a short based on the Trend Setup, the volume-based setup. If you look at this area, you can see that the price reacted to this zone very strongly in the past. Those two reactions tell you that this was a support, but in here, the support got breached, and it became a resistance, right? And that’s exactly at the same place where we have this volume cluster. So, that’s pretty cool about it. A combo of two setups: the Trend Setup, which is a volume-based setup, and this support-which-becomes-resistance setup, which is a price action setup. I must say that I really like to look for those, as they get a very good win ratio.
Now another one. Again, there was an uptrend, and within that uptrend, there was this significant volume cluster, significant volumes created in here. So, strong buyers were adding to their longs in here as they were pushing the price upwards, right? So, you wait for the pullback, and you go long from there. That’s the Trend Setup based solely on volumes. But also, the price reacted to this zone in the past, which tells us that this was a strong resistance. Then the price went past the resistance, and the resistance became a support, right exactly at the level which we previously identified with Volume Profile. So again, this is a combo of a volume-based setup and a price action setup. Both point to the same trading area, and that makes the trading level even stronger.
All right, guys, I hope you liked the video. If you want to learn more about Volume Profile trading, then head over to my website, which is trader-dale.com. In here, you want to click this button which says Trading Course and Tools, which will bring you to my trading education and custom-made trading indicators. So, that’s about that. Thanks for watching the video, and I’ll see you next time. Until then, happy trading.
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