Video Transcript:
Hey guys, it’s Dale here with a new video from the Trade of the Week series. Today I want to talk about an intraday trade that I took this week on GBP/USD.
Let me show you. The trade was based on a Volume Profile setup that I call the Rejection Setup. First, you need to see a rejection, which means the price goes one way, then suddenly turns and moves in the opposite direction. By the way, I do all of this on a 30-minute chart.
So, we have the rejection. Then, inside that rejection, you need to see a heavy volume cluster. That heavy volume cluster needs to clearly stand out, like this one. This volume cluster shows where the buyers who reversed the price from the sell-off into the buying activity started stepping in.
Let me delete all of this so you can see the volume cluster better. This is it. This is the volume cluster. It is the most important place within this entire rejection because this is where buyers entered with heavy volume.
The idea behind this setup is to wait for a pullback. When the price reaches the area where those heavy volumes inside the rejection were traded, you enter a long trade from there because the buyers from this area should defend a place that was clearly important to them in the past.
That’s the setup this level was based on, and my long trade entry was here. This line marks the place where I entered.
It wasn’t just about the volume cluster, though. It was also about a massive Fair Value Gap from Smart Money Concepts. This whole area was one large Fair Value Gap. In this bullish scenario, the Fair Value Gap begins here, which, as you can see, aligns perfectly with the beginning of the heavy volume cluster.
So, this was a combination of the Volume Profile setup and the Fair Value Gap. Together, they suggested there would probably be a reaction from this level.
At first, the reaction wasn’t very strong. There was only a small move, and then the price started rotating. The way I manage these trades is simple—I hold them regardless of how long they take to develop. In this case, I held the trade overnight. The price stayed around my entry, actually a little above it, and then, at the beginning of the European session, it finally started moving higher.
At this point, I’d like to talk about the stop-loss and take-profit placement, especially the take-profit placement.
Let’s start with the stop-loss. According to my rules, the stop must always go behind the heavy volume zone—the barrier that formed the level. In this case, that was this highlighted volume cluster. My stop was behind it, here at this red line. If the price had broken through that heavy volume cluster, there would have been no reason to stay in the trade any longer. If the buyers couldn’t defend that area, then my trading idea would simply have been invalid.
As you can see, the price eventually started moving toward my take profit.
My take profit was here, and there were several reasons for that.
Reason number one was this volume cluster standing in the way. Although it wasn’t a huge volume cluster, I was concerned that the price could react to it because heavy volume zones often act as support or resistance.
Reason number two was the weekly VWAP. I was also concerned that the VWAP could cause the price to reverse.
One more thing—look at this rejection in the past. This level acted as support previously, and once the price broke below it, that support turned into a small resistance.
So I had a volume cluster, the weekly VWAP, and a previous support turned resistance, all aligning in roughly the same area. That created a potential resistance zone, and I didn’t want to risk giving back the profit I already had.
There was one more reason. This was also the beginning of a bearish Fair Value Gap. Another reason to be cautious and exit the trade there because the price had reached a significant resistance zone.
In the end, the price reacted there, then rotated around the area for a while before eventually moving higher. But that was a risk I didn’t want to take.
That’s why my take profit was there.
This is how I manage my trades. I always exit when the price reaches the first significant barrier standing in the way—either support or resistance. Since this was a long trade, I exited at the first major resistance.
That’s how this trade played out.
If you’d like to learn more about how I trade and get access to my custom indicators, I recommend visiting my website at trader-dale.com. Click Trading Course and Tools and it will take you to the page where you can browse all of my educational and indicator packs.
Thanks for watching the video, and I’ll see you next time.
Until then, happy trading.
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