Oil Price Crash: FACTS

We are now experiencing something that has NEVER HAPPENED BEFORE. The prices of Oil are falling into negative numbers and the energy market is panicking.

Is this an opportunity of a lifetime or a mad gamble?

Here are some facts that may help you make your mind about that.

FACT #1: What caused this?

There are two factors that caused the crazy price drop.

The first factor is Russia and Arabia who simply flooded the market by their excess supply of Oil. Under normal circumstances, this would be bad, but what really made this a catastrophe is the timing which came along with the current COVID-19 pandemic.

The demand for Oil has plummeted because most of the world is now in a lockdown, and the economy is massively slowed down.

Simply put: Too much oil and nobody wants it.

 

FACT #2: Oil storages are nearly full

If there was a place where to put all the excessive and cheap oil, then it wouldn’t be such a huge problem. But unfortunately, the biggest Oil storages (both private and non-private) are almost full.

There are some storage containers still empty (mostly those under maintenance) but there are not many of them and even if they got filled it would not help too much.

FACT #3: Oil prices CAN be negative

When there is no place to store the oil, then the only option is to pay somebody to take it (unless you want it delivered into your backyard). This is a crazy thing, but it happens right now! Oil with March delivery went into a crazy sell-off and it ended up in negative numbers!

I personally thought I would never see such a thing, but here we are and this is happening right now!

FACT #4: Negative Oil prices were mostly caused by futures rollover

This plunge of Oil price was most likely caused by the futures contracts rollover. Everybody wanted to get rid of their Oil before the rollover and this caused the free fall and the negative prices.

If there was not a rollover I don’t think we would see Oil prices in negative numbers

FACT #5: Cuts in Oil production

An agreement has been made that the OPEC will cut the production of Oil. This should help the Oil prices to recover.

The production will be cut by nearly 10 million barrels/day. This is the biggest single cut in history.

This cut will take place from 1st May 2020 and it will be active until the end of June 2020.

FACT #6: The 10 mil. cut is not enough

The cut in Oil production was agreed upon in order to help the Oil companies and save them from bankruptcy.

Even though this cut is huge, it needs to be bigger in order to save most of the Oil companies. It would need to be around 20-30 mil cut instead of “just” a 10 million cut.

FACT #7: Oil companies will bankrupt

It is said that around 40% of the Oil and Natural Gas companies will go bankrupt within a year if the price does not rise at least above $30/barrel.

Or if they won’t get saved or bought by somebody else.

FACT #8: Big Oil companies will be taking over the small ones

Right now, it seems inevitable that some Oil companies will go bankrupt. The first ones to go are the ones with big debts.

What can be expected is that the biggest companies in the industry (like Chevron or Exxon) will want to take this opportunity and buy their smaller competitors cheap. 

This way they will grow even bigger and they will get rid of their competition. They only need to have the cash to do the acquisition.

FACT #9: Donald Trump is trying to save the Energy sector

Those are the steps the US president took to rise the Oil prices and to help the energy sector (or at least the main steps which I noted):

1. He managed to make the deal to cut the Oil production by 9.7 mil barrels/day.

2. He publicly announced that the US will be filling up their Oil reserves. He announced this twice (I think) and neither announcement helped the Oil to recover.

3. He said he would work on a plan to save the US Energy sector (companies). He announced this just a few moments ago so let’s wait and see what this plan will be.

?FACT #10: Plunge Protection Team in play?

This is not really a fact but my own hypothesis. I think the Plunge Protection Team is in play.

What do they do? They simply wait until the market is under some crazy pressure and panic, and then they start to pump money into it to save it from a total collapse.

I think this happened today (April 21st 2020) when the Oil was in a free fall. Then the price froze for about 5-10 minutes and then the price shot upwards from $5.69 to $11. That’s 100% gain in just a few minutes! Crazy right?

I think it is pretty likely that it was the Plunge Protection Team joining the game here.

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UPDATES

I will update this article if some new important facts about the Oil show up. If you have any (or if you have any corrections to my facts) please shoot me an email and I will update the article.

Stay safe and happy trading,

-Dale

How to do an Intraday VWAP Analysis

In my recent VWAP webinar, I showed you two trading setups you can use with the VWAP indicator. One setup which you can use when there is a rotation and the other setup when there is a trend.

BTW. if you missed the webinar you can watch it here:

VWAP Trading Strategies – Webinar

Today, I would like to show you how you can apply those setups in your trading.

I will demonstrate this on a 60 Minute AUD/JPY chart. I will use a Weekly VWAP – which means that every new week a new VWAP gets calculated anew.

Trend vs. Rotation

The first thing you need to do is to identify whether there is a trend or a rotation. Why? Because in the trend you will want to use the “Trend VWAP  setup” and in rotation the “Rotation VWAP setup”.

As I said at the webinar – it is best to use VWAP deviations to identify a trend from a rotation. When deviation (the grey line) moves vertically, then there is a trend. When it moves horizontally, then there is a rotation.

In the picture below, I divided the chart into four sectors.

In the first one, the 1st deviation (grey line) moves downwards – so there is a trend and we want to trade the “Trend VWAP setup

In the second section, the 1st deviation moves horizontally. This means there is a rotation and we want to look for the “Rotation VWAP setup“.

The third section shows a trend again, so we want to look only for the “Trend VWAP setup“.

The most recent section shows a rotation, so now I am looking for the “Rotation VWAP setup”.

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Trade entries

The picture below shows the same chart. This time I indicated possible trade entries. Those trade entries are based on the two VWAP setups.

The first trade is a short and it is based on the “Trend VWAP setup”. Then the second trade is also a short but this time it is based on the “Rotation VWAP setup”. The same goes for the next four trades (all based on “Rotation VWAP setup”). Then the market goes into a trend again so the next trade is a long and it is based on the “Trend VWAP setup”.

The current rotation

Currently, there is a rotation and there are two areas where we could trade from – long and short.

What I like about the short is a confluence with Volume Profile indicator. If you use the Volume Profile to look into the recent selling area, then you can see that there is a “volume cluster“. This means heavy volumes got traded there. Quite possibly volumes of aggressive sellers who are currently pushing the price downwards. If the price makes it back to this area again, then those sellers could start selling aggressively again and defend their short positions. This would help to move the price downwards again.

This makes this area (around 66.30) an interesting place for a short trade. I marked it in the 60 Minute chart below:

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

Stay safe and happy trading!

-Dale

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EUR/CAD: Volume Profile + VWAP Daily Analysis

Today, I am going to do an intraday analysis of EUR/CAD. I will use Volume Profile, VWAP and Price Action to do that.

What I want to show you is how you can use all those together to find strong confluences. What do I mean by a confluence? A confluence means a place where more signals from different trading indicators meet and point to a strong trading level.

Volume Accumulation Setup

The first thing I am going to talk about is a 30 Minute chart (EUR/CAD). What immediately caught my eye was a rotation from which a strong buying activity started. This is what I call the Volume Accumulation setup.

*I talk more about it here:

Volume Profile webinar

What I did was that I used my Volume Profile tool to see how the volumes were distributed there. As you can see in the picture below, there were heavy volumes created in the rotation. From this rotation a buying activity (an uptrend) started.

This tells me that buyers were entering their longs slowly and unnoticed in that rotation. When they were done with the volume accumulation, they started pushing the price aggressively upwards.

What is the most important place for those buyers? It is the place where they placed most of their positions. This is where the Volume Profile is the thickest – at 1.5462. This is a strong level they will most likely defend in the future (support).

Daily VWAP

Below, you can see the same 30 minute EUR/CAD chart. This time I will focus on the VWAP. In this chart I am using a Daily VWAP. This means that every new day this indicator gets calculated anew.

If you look closely, then you will see that the grey line from yesterday (1st deviation of VWAP) ended it’s calculation at 1.5462. This is exactly the same level as the Volume Profile pointed us to!

This makes it a nice confluence of two signals. Volume Profile + 1st VWAP deviation.

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The big picture

There is more! Let’s now have a look at the 60 Minute chart of the same instrument. I use this chart to give me a bigger picture (overview) of the market. In this chart I use Weekly Volume Profile and Weekly VWAP. This means that every week a new Volume Profile will automatically get printed. Also a new VWAP will start it’s calculation every new week.

Since it is only Tuesday morning, I merged two Weekly Volume Profiles together (to get more data). The one from the previous week and the one from this week (this one was showing only volumes from yesterday and today).

What those two merged profiles showed me is a significant volume area at our level (1.5462). It is especially important to me because this  volume area is nicely visible from the weekly point of view (the bigger picture). It is in fact, the second strongest volume area in this whole period.

As a nice addition to this there is also the 1st deviation of the Weekly VWAP almost exactly at the level. Now, this deviation is till moving so we don’t know where it will be when the price makes it back to the 1.5462 support. But if the 1st deviation is close, then it will be another nice confluence to this level!

Price Action

A small bonus to all that is that there were also two very nice reactions to this level in the past. I highlighted those reactions in orange. Such reactions mean that this level worked as a support in the past – therefore, it was an important level. This adds one more little confluence to the whole picture.

EUR/CAD; 60 Minute chart:

Intraday trading workspace

Do you think it is too hard to track all this? It takes some experience but it is not that hard. Especially if you know what to look for. What helps is to have a nice (and clean) intraday workspace that shows you everything you need.

What you see below is my intraday trading workspace. It consists of three charts and it shows all the things I was talking about in this article. Everything on just one screen.

I am not saying it takes just a quick look and I immediately see strong trading levels. It takes some thinking to find them, but having a workspace like this makes things way easier!

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Don’t risk too much!

One important thing to wrap this up. Don’t risk too much on one single trade. No matter how many confluences, no matter how strong the level appears. No trading strategy has 100% win rate and there is always a risk of taking a losing trade. Losing trades are part of this business.

You should be extra careful especially now when there is news coming up very often and the overall market volatility has risen dramatically.

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

Stay safe and happy trading!

-Dale

NZD/CAD: An Intraday Analysis from A to Z

Today, I am going to do a complete intraday analysis on NZD/CAD. I am going to show you the way I always do it from A to Z.

Rotation vs. Trend

The first thing I check is whether there is a trend or a rotation.

If there is a rotation then I am looking for both buying and selling opportunities (longs and shorts).

When there is a trend, then I am looking only for trades which are in line with the trend.

NZD/CAD is clearly in a downtrend, so I will be looking for short trades only.

NZD/CAD; 60 Minute chart:

Weekly Volume Profiles

After I decided whether I look for longs, shorts, or both I look into Weekly Volume Profiles.

Those should point me to the strongest intraday supports and resistances.

If an intraday support/resistance is clearly visible on the Weekly Volume Profile, then the chances of a successful reaction to it are higher.

Why? Because even those traders who trade bit higher time frames will be interested to trade these volume support/resistances. In other words – such trading levels attract more traders – for example, intraday traders using 15-minute charts as well as swing traders using 1-hour charts.

So, if a level is visible on the bigger picture, then chances of success are bigger.

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Weekly VWAP

The next thing I check is the Weekly VWAP and its Deviations. Actually, it is the Deviations that interest me the most.

Deviations have many functions. The first function is that they show whether there is a trend or a rotation. If there is a trend (like in this case) they point me to places where the price could make pullbacks.

In a downtrend, the price usually moves below 1st Deviation and reacts to it from below.

As you can see in the picture below, the price already made some reactions to it this week. If the price hits the 1st Deviation again, there could be another reaction.

NZD/CAD; 60 Minute chart:

Weekly Profile + VWAP confluence

If you look at the picture above, then you can see that there is a nice confluence of two trading signals.

The confluence is that the 1st Deviation is almost at the Weekly POC (the place where the heaviest volumes throughout this week were traded). I think that chances are that the 1st Deviation will actually get there in a couple of hours.

Such confluence marks a really nice resistance level.

In a case like this, I switch to a lower time frame to see where exactly the resistance is and what exactly happened in this area

Detailed Flexible Volume Profile analysis

Now I switch from 60 Minute to 30 Minute time frame.

There is a nice rotation with heavy volumes accumulated in this area.

I call this the Volume Accumulation Setup and you can learn more about it here:

Volume Accumulation Setup EXPLAINED

This tells me that there was a rotation in which sellers were building up their selling positions. Then they started selling again and pushed the price lower.

When there is a pullback into this area, chances are that those sellers will become active again and they will try to push the price downwards.

The heaviest volumes in this rotation were at 0.8397. This means that the sellers placed most of their positions there. For that reason this price level is the most important level for them.

Summary

In the end I came up with an intraday trading resistance at 0.8397.

Reasons:

1. Downtrend (I want shorts)

2. 1st Deviation of VWAP

3. Weekly POC

4. Intraday trading setup on 30 Minute chart

All those 4 points are in line with each other point to the 0.8397 resistance.

Does this mean it will surely work? Absolutely not!

In trading even the best resistance or support can fail. We as traders must accept that there is no way we can be right in 100% of the cases. In fact I consider an experienced pro trader whoever is able to maintain 60% win rate in the long run. If you manage that, then congratulations, you are a winner in this game!

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

I will be looking forward to see you on Monday with Weekly Trading Ideas Video!

Happy trading!

-Dale

How Deep Can The EUR/USD Drop?

All eyes are on the EUR/USD again. The reason is that it broke all significant supports and it is under strong and constant selling pressure since the beginning of this month.

Is there a way to tell where this strong downtrend might stop and possibly turn?

Yes, there is! But we need to have a look at higher time frames – weekly or monthly. Why? Because we need to see the price action and volumes that were in this area in the past.

The last time EUR/USD was as low as it is now was in 2017. For that reason, we need to look into this area and try to find something to hold onto there.

What happened in 2017…

2017 was a trend year. First, there was a few months of rotation from the end of 2016 to the beginning of 2017. Then a massive uptrend started and lasted almost a whole year.

Now, I am interested in how the volumes were distributed in this area. When I use my Flexible Volume profile on the 2017 uptrend, then it shows this.

EUR/USD, Weekly chart:

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In the screenshot above you can see that I marked a significant volume cluster area from beginning of 2017.

What this tells me is that there were massive volumes accumulated there. Then the trend started.

Trend started with a gap

If you look closely, then you can see, that it actually started with a gap! An interesting thing worth pointing out is that sellers were not able to close this gap! The buyers were just pushing too hard. Scenario like this is very rare and it shows the power of buyers.

So, we have heavy volumes at the bottom, then a gap which did not get closed and then one year of an uptrend.

Heavy volume cluster in 2017

The buyers who started this crazy uptrend in 2017 were initially building their buying positions in the rotation I marked. From there they were pushing the price upwards.

Currently, after almost three years the price is heading back into this area.

What is going to happen? This is trading, we can never be sure, but chances are that there could be a buying reaction from this old volume cluster (around 1.0600).

The reason for that is that the buyers who were there in 2017 could become active again and cause another strong buying activity. This would stop the current sell-off and it could eventually turn it into a new buying activity (an uptrend).

Also the sellers who are currently pushing the price downwards probably won’t want to risk a fight with the buyers from 2017 and they will quit their selling positions.

They will most likely do so at the volume cluster from 2017.

When a seller gets rid of a short position he needs to buy (go long). This also helps to push the price upwards.

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If you liked this long-term EUR/USD analysis, you may want to check out two older articles, where I predicted and traded this strong sell-off on EUR/USD:

EUR/USD short – trade description and strategy

EUR/USD short – how I made +1.600 pips on this single trade

 

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

Happy trading!

-Dale

GOLD – Intraday Trading Analysis With Volume Profile

The previous week I wrote about the importance of the big picture analysis. I did a long – term analysis on Gold using Weekly charts and Volume Profile.

You can read this analysis here:

GOLD – The Big Picture

Now, I would like to zoom in a bit and analyze Gold on a much lower time frame (30 Minute). This will point us to intraday supports/resistances which are currently there.

Price Action analysis

Let’s first start with simple Price Action. Currently, there is an uptrend on Gold. It looks like this:

When there is a trend development like this, then I like to use my Flexible Volume Profile on the trend area. My goal is to see significant Volume Clusters which got accumulated in the trend.

Volume Clusters

What does a Volume Cluster in a trend mean?

Volume Cluster is an area, with heavy volumes. You should be able to spot them easily with Volume Profile. They should be visible on first sight. Nice and clean, that’s what we are looking for.

When there is a Volume Cluster (or more of them) created in a trend, then it means that heavy volumes got traded there.

In this case, there is an uptrend. Volume Cluster in an uptrend means this:

Buyers are pushing the price upwards and there are places, where those buyers were adding massively to their buying positions (that’s where we see Volume Clusters). Then they drive the price even higher.

Below, you can see the same chart as I have already shown you, but this time with Flexible Volume Profile.

XAU/USD; 30 Minute time frame:

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GOLD: Intraday Supports

In the picture you can clearly see three significant Volume Clusters. Those were areas where buyers were entering most of their buying positions.

What will happen when the price turns and makes it back to those three areas?

Chances are, that those buyers who were building up their buying positions there will become active again. They will try and defend those areas (defend their positions), and they will try to push the price upwards from those areas.

This is why those three Volume Clusters should work as significant (intraday) supports.

Does it matter when the price makes the pullback to those levels?

Well, in my experience markets have really good memory. So it does not matter that much.

Those three Volume Clusters should be strong Supports even after few weeks after they got formed!

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I hope you guys liked my intraday analysis.

Please let me know what you think in the comment section below!

Happy trading!

-Dale

An Ugly Trade: USD/CAD Swing Trade Analysis

The reality of trading is that there are not so many trades that would go exactly how you planned them.

If somebody tells you that market always does what he predicts and that there are no ugly situations, then I would not really trust such a guy…

Today, I am going to show you one pretty ugly trade which I had on USD/CAD.

This trade did not go as I planned it! At least not at first…

I would also like to show you how important is to stick to your strategy no matter what!

USD/CAD Swing short

The trade I am going to talk about is a swing short on USD/CAD.

I published this level in my Member’s area a couple months in advance and since then we have been waiting for the price to hit it.

The short entry was based on Volume Accumulation Setup and it was at 1.3282. Standard SL was at 1.3321 and Take Profit at 1.3243.

I trade all my swing trades using the Alternative SL. This means that I do not close my swing trades unless a Daily candle closes past my Standard SL. This method also uses a hard Catastrophic SL (if price touches it, then I am out immediately).

*You can learn more about the Alternative SL here: Alternative SL

Below is a Daily chart of the USD/CAD where you can see what the level was based on and how it went.

As you can see from the picture, the trade went pretty ugly. It did not react to my short level (at first) and even the standard SL got hit!

In a situation like this it is very important to stick to your plan no matter what!

Let me now show you a detailed look how this trade went. I will demonstrate on a 30 Minute chart:

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Detailed look (30 Minute chart)

1. Before my short was hit, there was a strong buying activity showing aggressive buyers. It is not really a good feeling to go short against such force, right? But you gotta stick to the rules, so I went short as planned.

2. Then there was a rotation around my short level. I know that many people don’t like when the price does not react immediately to their level. But I don’t mind. In my experience, markets need their time. In fact I was happy that the strong buying stopped and I did not take an immediate Stop Loss.

3. This is when it all went sour! There was a crazy strong pin bar showing aggressive buyers (formed during macro news).

4. Next ugly thing after the pin bar was another strong buying activity. After this the price actually hit the standard SL! At that moment it seemed like almost 100% certainty that this trade would be a loser.

Despite all this I held my position according to the rules. Daily candle still did not close above the standard SL! You gotta stick to the rules 🙂

5. The first positive thing was when this strong rejection of higher prices occurred. Sellers are back! Hooray!

6. When the price went below two strong lows (highlighted in red) I knew we were heading for the Take Profit!

Finally, after 11 days!

What I wanted to show you with this is how important it is to stick to your rules, no matter what happens. Pro traders don’t change their rules in the spur of the moment or based on their emotions.

Next time some trade looks ugly and you want to break your rules, remember this trade, okay?

BONUS: VWAP as Take Profit

There is one more little thing I wanted to share with you here.

If you look at the Daily chart again, then you can see how the Take Profit nicely aligns with 1st Deviation of Yearly VWAP.

This 1st Deviation indicates a possible price reversal there (Trend VWAP setup I teach in the VWAP Video Course).

That’s what I call a good place to quit a short trade!

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Intraday longs along the way!

By the way, I grabbed two nice intraday trades during this swing trade.

Funny thing is that despite I was short with my swing trade, those intraday trades were longs!

Below are the two intraday longs. The second one was actually at the swing trade Take Profit!

Both longs were also published in advance for members of my Trading course.

USD/CAD; 30 Minute chart:

I hope you guys found this interesting! Feel free to leave a comment below and let me know what you think!

Happy trading!

-Dale

How To Plan Long-Term Investments With Volume Profile

One of the best things about Volume Profile is its versatility. You can use it across timeframes, and of course on all possible trading instruments. In this article, I’m going to walk through how to use the Volume Profile to find and plan trades that are basically long-term investments rather than the usual intraday or swing trades. To give you some idea what I have in mind – stop losses for such trades are in hundreds of pips, with a take profit stretching over 1,000! These very long-term setups many take months or years develop and trigger. Following your entry, you can be in the trade for another few months. Crazy, right? Well, it sounds crazy only if you look at it from the point of view of an intraday or swing trader. Imagine yourself being, for example, a stock investor. This kind of trading is much closer to that style than it is our typical day trade or swing trading setups.

The great thing about those trades is that you can plan them way ahead and then just set a limit order and all but forget about it. After you do your analysis and set your limit order, you don’t need to spend time thinking or managing this trade another minute. This type of trade is ideal for people who like investing but don’t really want to sit in front of the computer analyzing charts every day.

Let me now show you how to plan this type of trade. I will demonstrate on a current investment opportunity I see on the EUR/USD.

EUR/USD Long Term Position Trading

I made this analysis with a Monthly chart (1 candle = 1 month). This chart shows you the past 14 years.

The first thing that caught my eye was the price bouncing off one support zone three times. I marked those three strong reactions in blue color. Those three strong reactions were back in the years 2008, 2010, and 2012. Because of those extremely strong reactions to this area I consider it a strong support zone. As you can see the price finally went past this strong support at the end of 2014. When such a strong support gets breached, it becomes a strong resistance zone. Even though the price hasn’t returned to this area since the end of 2014, it remains a really strong resistance zone. This support becoming resistance is the first step and the first confirmation of this type of trade setup.

The second confirmation of this level is a significant volume cluster that got created within a strong trend. I call this a Strong Initiation Setup. I usually trade this setup as an intraday or swing trading setup, but it works very nicely for an investment trade setup like this one. The idea behind the Initiation Setup is that the strong sellers that were pushing the price lower, were adding to their short positions at the volume cluster and then continuing the aggressive selling activity. When the price returns to this volume cluster, those sellers will likely be defending their positions, and they will start the aggressive selling activity again. This should push the price lower again.

The two reasons above would be enough for me to consider this a good level to trade from. Additionally, I spotted one more confirmation of this strong resistance zone, which is the 161.8% Fibonacci extension. To make myself clear – I personally don’t give Fibs much value in my analysis or decision making (as they are somewhat discretionary) but having another confirmation is a good thing. Still, I would never base a trade solely on a Fibonacci extension level. In this case, I used the high and the low of the significant sideways price action channel formed between 2015 and 2017. We can consider this channel as a sort of temporary equilibrium place which the market saw as fair value for the EUR/USD over the last 2+ years. The high and low in this area is quite strong orientation point. When I used the Fibonacci extension in this area I noticed that a very significant extension of 161.8 % is basically in the resistance zone I identified earlier (exactly at 1.2561). Bingo!

How To Enter The Market

So, those are three pretty solid confirmations of our resistance zone. Let’s now have a look at how to trade it.

Let’s start with the Profit Target placement. In this case, I would suggest placing the PT at the place where strong volumes were accumulated right before the uptrend started in 2017. This is pretty strong support zone, and I think it would be quite risky not to take your profit slightly before the price reaches this zone. I think 1.0700 is a logical place to quit this short trade with around +1,700 pips of profit. The distance is really far, and it will most likely take many months for the price to get there. If you personally prefer a tighter take profit, you can look to take profit (or part of it) at 1.1700 which is also a very strong support zone (reason being is the volume cluster along with the 100 % Fibonacci).

A good place for a Stop Loss is around (or just a little bit above ) the 200 % Fibonacci extension at 1.3086. Apart from the Fibonacci, you can see that the high volume area basically ends there. If the price goes past the heavy volume zone, it won’t work as resistance any longer. As such, should that level break it is best to have your stop loss in that area.

 

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Second Trade Setup Scenario

If my first scenario doesn’t work and the trade ends in a Stop Loss, the game won’t be over yet. At least not for me. Here is what I will do:

If I take a Stop-Loss, then I will wait for the price to get back to the place where I originally went short and I will go long. Reason? Support becomes resistance (and vice versa), remember? 🙂 Such a strong level is usually not left without a significant reaction and for that reason, if my first attempt fails, I won’t be discouraged but I will wait and enter a reversal position.

The Profit target for the reversal position will most likely be around 1.3600 because it is a strong volume area. It is basically the Volume Accumulation setup there (= strong resistance). The Stop Loss could be little below the 100 % Fibonacci and below the heavy volumes. This is around 1.1600. Those volumes and the 100 % Fibonacci would be the last barrier which would be likely to stop price. If that fails there would be no reason to remain in the long position anymore.

So this is my investment idea for the EUR/USD. As you can see it isn’t really that complicated. Especially if you do this kind of analysis from time to time you will get better, faster, and more confident in doing it. Planning such a trade could realistically take you 10-20 minutes. After that, you can just set a limit order and check your trade once a week or even less!

Money Management & Risk Per Trade

I would like to stress one very important thing. You need to calculate the volume of your trading position before you enter the market. Having, for example, a 500 or a 1,000 pip SL requires you to adjust your position so you don’t risk more than your money management plan will allow. I would keep your risk per trade between 2 % and 5 % of your total account balance. With that being said, this is only a guideline and you must adjust your risk per trade based on your own risk tolerance.

Happy trading

-Dale

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Market Profile: Long-Term Swing Trading Analysis

Hello guys,

This training article is going to break down how I analyze the markets from a long-term point of view. My swing trade levels are always based on the exact analysis we are going to cover here. Let’s have a look at how I set up for a trade, step by step.

Trade Analysis Requirements

For this analysis, you will need cumulative Market Profile (or yearly) that will show you the long-term volume histogram. For that, you can use Market Profile from TradingView (PRO subscription). You will also need to use daily profiles or short-term cumulative profiles (also from TradingView) to place the levels more precisely. As for the timeframe, I use mainly daily candles with the cumulative (yearly) profile and the 30-minute chart for the daily or short-term cumulative profiles.

Note: Daily profiles with 30-minute candles are just for putting my swing levels more precisely. They are not that significant in the bigger picture. What matters most in this kind of analysis is a yearly profile on the Daily chart.

This is what your workspace should like. The left chart shows the 30-minute chart with the daily market profile. The chart on the right (the main chart) shows Daily candles with the cumulative profile for the last year (click the picture to enlarge).

Cumulative Market Profile Shape

The first thing to do when analyzing the market from a long-term point of view is to look at the shape of the long-term cumulative profile (in this case yearly). If you are not familiar with the basic shapes the profile can have, and how to trade those, please read this article: Market Profile 2 – different profiles and their application. All the examples in this article are made on daily profiles, but the logic stays the same regardless of the time frame you use.

The reason for doing this step in the first place is to see the bigger picture. When you know what the yearly profile looks like, then you can trade with the bigger picture in view. You also know what strategy you want to use and what areas you should be looking to trade from.

As an example, let’s look at a daily chart of the CHF/JPY. The cumulative profile of the current year is “D” shaped. For this reason, I immediately know that I want to look for both short and long swing levels to trade. Those levels should be at the extremes of this “D” shape, and the maximum potential for those trades should be a retest of the POC. I marked two potential swing trade levels in the chart below. One is a short from around 117.40; the other is a long from around 108.70.

 

Point Of Control (POC)

For me, the POC is the most significant information that Market Profile can give us. This is because the POC is the price point where the most volume was traded. In this case, it is a price point where the most volume throughout the year was placed. If you think about it, it really is a very significant piece of information. For example, if you have a “D” shaped profile, the POC often becomes a magnet as this is where the market was in balance. With that knowledge, you can expect that the market will have a tendency to return to this balance area.

Significant Price Action Areas

The most significant areas from a price action point of view are:

1. Sideways price action area

2. Aggressive initiation area

3. Strong rejection area

You probably know those from my Market Profile Webinar. I use those areas to make a picture of what is going on in the given market and to create my own trading levels. Let’s have a look into these in a little more detail.

  1. Sideways price action area – Is significant because heavy volumes are typically placed in these areas. Because heavy volumes mean big institutions, these areas indicate where institutions accumulate and build their positions.
  2. Aggressive initiation area – Is an area where price runs very quickly, aggressively, and without pullbacks. It usually follows areas of sideways price action. Large institutions (smart money) finish building up their positions and after that, the price is allowed to run. The direction of this aggressive initiation area shows which side of the market is in control, whether the buyers or the sellers.
  3. Strong rejection area – Clearly illustrates strong and aggressive buyers or sellers in a given area.

Creating Swing Trade Levels

At this step, I already know how the institutional volumes were distributed throughout the year, and I know where most of them were accumulated (POC). I also know where the most significant areas on the chart are from a Price Action point of view. The only thing that is left to do, is to create the trading levels using all this information.

At first, I create my levels using the yearly profile and the Daily price chart. Those levels can lack some precision so I look into the 30-minute chart and daily profiles. This allows me to more accurately identify where the volume is located.

Let’s have a look at the CHF/JPY  example:

Because of the analysis above, I now know that I want to get long somewhere around the 108.70 area. There are 4 main reasons for this trade:

  1. The yearly profile is D shaped.
  2. This level is at an extreme of the D profile.
  3. There is a volume cluster visible on the yearly profile indicating institutional activity.
  4. There was a strong rejection of lower prices in this area.

If I zoom into the 30-minute chart, I see there was sideways volume accumulation followed by aggressive buying initiation. This allows me to mark the level much more precisely as compared to doing so from the Daily Chart. Now my long level makes sense from both the higher and lower timeframe. Here is a picture of the chart.

That’s it

So, guys, this is how I use Market Profile to swing trade high probability turning points. I suggest you try it on your own and then feel free to contact us with any questions you might have!

Happy trading!

-Dale

P.S. Here is a video that covers this whole process. Also, one extra swing level is mentioned there.

P.P.S. If you want to become a member of my Pro Forex Course and get access to the Propitiatory Market Profile Course, Daily Levels Video, Swing Trading Levels, Auto Trading EA, Member Forum, and Personal Support you are very welcome to join here: Trader Dale’s Pro Forex Course