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Video Transcript:
Here is a simple pullback strategy using Volume Profile and Anchored VWAP. Volume Profile helps us find areas where big volumes were traded, and Anchored VWAP then shows us the fair price from those areas. Together, they point us to great places to trade pullbacks from. So, let’s get to the chart and see how it works.
Volume Profile shows where the big volumes were traded on the chart. That means that it sort of reveals where the big trading institutions were active, because big trading institutions trade with heavy volumes, right? So, if you look at this chart, then there is this rotation, and in this rotation, heavy volumes were traded, right? You identify that place with Volume Profile. That is the first step. You want to see heavy volumes traded within a rotation like this.
The second thing is that this needs to be followed by a trend activity, a strong trend activity like this one. And this is the important place you want to anchor the VWAP to. It is important because the big guys, the big trading institutions, were accumulating their trading positions here, right? And it is also the start of the trend. So that is why this is important, and many traders are placing their trading decisions around this, especially around the place where the volumes were the heaviest and around the place where the sell-off started or where the trend started.
So that means you want to anchor the VWAP to that candle, to the last candle of the rotation, which is usually the first candle of the sell-off, right? So, it is this huge red candle in this example. That is where you anchor the VWAP, and you trade pullbacks to that because VWAP represents a fair price since this important place, right? So that means short from here, short from here, then as there is this rotation, you do not really want to do anything because when the market is rotating, VWAP setups do not really work.
And then this resistance, the resistance which is represented by the VWAP, turns into a support, right? Because the price is moving above it. So that is why you want to wait for the pullbacks to that support and enter longs from there, right? Again, the logic is the same. Buyers want to buy for a fair price.
Now, here is another example. Again, this is a short trade scenario because we have this strong downtrend commencing in this heavy volume zone. In this case, you anchor the VWAP to this candle. This is the start of the sell-off. Also, it is the last candle of the rotation. By the way, if you anchored the VWAP, for example, to this candle instead of this candle, the VWAP would not really change too much. So, do not worry. You will not mess this setup up if you choose a different candle, for example, this one instead of this one.
So, anyways, you anchor the VWAP there to this candle, and then you trade pullbacks. You simply need to see the price go away from the VWAP and then enter a pullback here. That is short from this place, short from this place, and short from this place, right? Sellers want to sell for a fair price.
Now, here is one last example of this. Check out this little rotation where those massive volumes were traded. And as you can see, it is followed by this strong sell-off. So, this is telling us that sellers were active here in this rotation, building up their short positions, and then they pushed the price downwards. It is a very important place, and the big traders want to base their trading decisions around this.
So, since this place, the VWAP represents the fair price, and sellers want to sell at the fair price. That means that sellers are selling here, and so should you. So, when the price hits the VWAP, you initiate a short trade, right?
And here, the price was not moving too much because this was the Asian session. That is basically the start of the day. Liquidity is low, and volatility is low. So that is why the price was not moving too much. That is why the reaction was not too swift. But I do not really have problems holding trades even for a couple of hours like this. I learned to be patient. I wait. And that is what has been working for me.
Anyways, there is a second test right here. And that means another short from this place. All right, guys, so that is it. I hope you liked the video.
If you want to learn more about VWAP or Volume Profile trading, then head over to my website. This is it. It is at trader-dale.com. And if you click this button, which says Trading Courses and Tools, then it will bring you to this page where you can browse my trading education packs and also custom-made indicators. So, thanks for watching and see you next time. Until then, happy trading.
