DAX: Swing Trade Analysis With Volume Profile And Price Action

Hello guys,

in today’s post, I am going to look into the German index DAX. There I am going to show you a swing trade idea which you can best see on a 4 Hour or Daily chart.

DAX is in a long-term uptrend. It has been like that for more than a year actually. For this reason, I am only interested in Long trades. So, I look for strong Supports.

How do I look for them? Using Volume Profile, of course 🙂

DAX – Volume Profile Analysis

When there is a trend I use my Flexible Volume Profile indicator over the trend and I want to see significant volume areas. Those are places where (in an uptrend) strong Buyers were adding to their Long positions.

Why are those places important? They are important because the Buyers who placed their Longs there will want to defend those zones – their Long orders. If the price goes past those zones, the Buyers will be in red numbers. Obviously, they don’t want that. So they will defend those zones.

Defend how? With Market Orders. They will use aggressive Market Orders to push the price up again. With enough Market Orders, they are able to manipulate the price to turn and go up again.

This is why heavy volume zones that got created within an uptrend are strong Supports.

Such a zone is nicely visible on the 4 Hour DAX chart:

This Support zone is around 14.500 – 14.600. This is where the volumes were really significant and where the reaction is most likely to happen.

This setup is one of my favorite Volume Profile setups and it is called the “Trend Setup“.

One More Support On DAX

Maybe you’ve noticed that there is also one more heavy volume area at the bottom of the chart.

This is also a super important Support! I wrote about this one in an article around a month ago. You can check it out here:

DAX – swing trading support around 13.900 – 14.000

I hope you guys liked today’s analysis. Let me know what you think in the comments below!

Happy trading,

-Dale

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7 Comments

  1. Peter

    Hi Dale,
    why did you not trade the first volume cluster which is on the top? It looks like a lot of volume accumulation within narrow price range.

    1. Trader Dale

      There was a bit weak low there. It is risky to trade longs from such areas. In the end the price tested that free liquidity below the weak low with a rapid move. That was what I was afraid of.

      1. Peter

        OK, thanks. I must look back into the book to find out how to better identify those weak lows/highs. I’ve seen on many occasions that such PB to this sideways/rotation worked perfectly, and have to find out what is different.
        On the other hand, in such market structure it might be potential to wait for the reaction and directional/signal candle and open a stop order above such candle high. (assuming the big guys just wanted to hit stops below the rotation)

    2. Jean

      Hi peter,

      this is Jean… Newbie here…

      Permit me to play the TD’s Assistant here (Joke 😉 )… anticipating his answer… Hoping he could correct me if i am wrong…

      If i get it right… TD’s experience permits him to know institutional operator tricks, that’s why he didn’t trade the first uptrend following the Sideway area relative to the top volume cluster, if it’s this trade you were talking about… In fact he has anticipated the probability of a fake movement and that ended to happened… and that’s why there is almost no reaction when the price comes to revisit, the sideway price Level, therefore since the POC of the top cluster is tested with no reaction, The next downtrend target is 14600-14500.

      Regards,

  2. Peter

    How many pips for TP and SL would you be using Dale? I’ve never traded on a stock or index. I had a quick look at DE30 on cTrader and the lot sizes are not what I’m used to compared to FX. I’d have to use much bigger sizes to get the value per pip that I usually use with FX. Thanks in advance.

    1. Trader Dale

      SL at 14400 (with alternative SL method – more on this in my Volume Profile book). TP at least the same pip count as SL. So at least RRR = 1. Ideally more.

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