A MAJOR Support on AUD/USD NOW!

There is now a lot of attention on the AUD/USD. The reason for this is that it has just hit it’s 11 year low!

There are fundamental reasons for this (fires, Coronavirus,…) but I don’t really believe the AUD can fall indefinitely. Sooner or later it will bottom out and I think this moment is coming!

Look back in the past

When a trading instrument falls to its multi-year lows and you want to look for a place where it could bottom out, then it is best to load some historical data and check out if the price was as low or lower in the past.

If you load enough of historical data, then chances are that you will find out that the price actually was as low or even lower at some point in the past.

Check out the volumes

The next thing you want to do is to use Volume Profile tool to look into volumes and their distribution. The important thing is how the volumes were distributed in the past, when the price was as low as it is now.

When you do this, you may be able to identify a strong Support which would mark a place where the price could stop falling and reverse.

I did just that on the Monthly chart of AUD/USD:

AUD/USD Monthly chart analysis

In the chart above you can see that the price is now hitting an area where it already was in 2009.

The first thing that should get your attention should be the strong rejection of lower prices (in 2009). I marked it in the chart.

This rejection tells us that the price was falling rapidly. There were three months of crazy selling. Then the price turned and went into a crazy uptrend.

This means that sellers were pushing the price downwards but then very strong buyers came in and with massive force and aggression started a new uptrend.

You can learn more about the Rejection setup here:

Rejection setup explained

Volume Profile analysis

If you look into the volume distribution in this rejection area from 2019, then you can see that there was a significant Volume Cluster created around 0.6500.

This Volume Cluster points us to the place where the buyers who turned the price in 2009 placed lots of their buying positions. For them, this is the most important place in this whole rejection!

As you can see, currently the price is getting into this area again. Will those buyers from 2009 still be there defending their positions? I think they will!

I know it is over 11 years, but strong volume zones like this one don’t just get forgotten. Markets have good memory!

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What happens now?

Now I think the chances are that the downtrend will stop and possibly turn. Price is approaching a strong volume area which will most likely be defended by strong buyers. Those buyers will try to push the price upwards again.

Remember that this is a Monthly chart, so this may not happen today or tomorrow! It could take a few months! With trades like this patience is the key!

Check out the Swap!

If you are into trading such long-term trades as this one then there is one thing you should always consider before entering your position! The thing is Swap.

Swap is a payment you will pay (or sometimes receive) when you hold any forex position overnight.

If you trade on Monthly charts it is possible that you will hold your position for many weeks or months! Every day you will pay (or receive) Swap.

IMPORTANT: Every broker has a different Swap!

My advice is that before opening a long-term position you check your brokers website and see what is the swap you will pay or receive. There should be a table that will look like this:

 

In this table you should be able to see the trading instrument you want to trade and Swap for Long and Short positions.

In this example, you would pay $3.79 (per lot) every day you hold a Long on AUD/USD and $0.09 if you hold a short.

Ideal scenario is when the Swap is positive and you actually receive money for holding your position.

This was for example the case of a short on EUR/USD I held over a year. Apart from +1.600 pip profit I was also getting a positive Swap every day. Because I held the trade over a year, the positive Swap increased my profit from this trade by 20%.

I wrote more about this EUR/USD trade here:

EUR/USD short trade: Prediction

EUR/USD short trade: Commentary

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

Happy trading!

-Dale

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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

A MAJOR Resistance on GOLD

I received quite a lot of emails from people asking me to do an analysis on Gold. I am not surprised by this. Gold prices are surging again and people are getting interested (again).

Today I am going to do a big picture analysis and point out the most important support and resistance zones.

The BIG picture

If you want to do an analysis of any trading instrument, it is always best to start from the big picture. By the big picture, I mean THE BIG picture!

In this case, I pulled 10 years of data and printed it on the Weekly time frame.

This allows me to see the complete BIG picture.

The next thing I did was that I draw my Flexible Volume Profile over the whole 10-year area.

Result? A 10-year Volume profile with two really clear heavy volume zones. Those are the most crucial areas in the whole 10 year period!

And the most important zones in those two heavy volume areas are the places where the volumes were the heaviest. Those are the volume peaks or you can also call them “local POCs“.

One is around 1665.00 and the other is 1285.00

You can see this on the Weekly Gold chart below:

 

Support at 1285.00

Let me first talk about the 1285.00 area.

As you can see from the picture, there was a very long rotation (2013-2016). I remember that when Gold started rotating there, people started to lose interest in it.

You know, this is funny. In rotation like this big financial institutions are building up their positions, getting ready for an action and what the rest of retail traders do? They lose interest. They get interested again only when there is a strong trend. But at this point it is usually late! This is something to think of! But let’s now get back to the topic!

So, from this long rotation price finally shot upwards. What does this tell us? That it was mostly buyers who were accumulating their positions in the rotation!

When the price re-visits this area again, it is pretty likely, that those buyers will become active and aggressive again and that they will drive the price upwards.

This is why I think that the Point of Control (POC) of this area is a really strong support.

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Resistance at 1665.00

Now the price is going aggressively upwards. Lots of people finally realized there is an uptrend and that they would also like to have some piece of the cake.

We who use Volume Profile know, that this idea is pretty risky.

The reason is that the price is heading towards a major volume based resistance.

If you look at the Weekly chart again, you can see that there was a strong rejection of higher prices in the past.

This means that in 2010 the price went aggressively upwards, then a rotation started (2011/2012) and then a sell-off (which ended in 2013).

There were pretty massive volumes accumulated in the rotation before the price changed its direction (2011/2012). Sellers were building up their selling positions in this rotation and then they pushed the price downwards into a new trend.

Currently, the price is getting near this heavy volume area again.

Even though it has been 8 years since the price was at those levels, I still believe that there will be a reaction.

Where exactly? The most important place in this heavy volume area is in it’s POC (1665.00). This is the place with the highest probability of a strong reaction.

 

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How to manage such trades?

If you like this sort of long-term analysis and long-term trading, then you need to remember that for such trades you need to have wide enough Stop Loss and Take profit.

I am not going to tell you where to place it, but with time frames like these (weekly or monthly) you need to let the trade breathe and develop! You cannot expect an immediate reaction.

Want to learn more?

If you found this interesting, you may also like to read another two articles I posted here about this sort of long-term trading:

How To Plan Long-Term Investments With Volume Profile

A Story Of A +1,600 Pip Trade

I hope you guys like this analysis and that you found it helpful.

Have a GREAT weekend and I will see you on Monday with a new Weekly Trading Ideas Video!

 

Happy trading!

-Dale

The Last Support Before EUR/USD Hits Its 3 Year Low

All eyes are now on EUR/USD!

Why? Because EUR/USD is by far the most traded currency pair and it is pretty near its 3-year low!

Let me now show you what I think about this development.

The BIG picture

The first important thing to notice is the big picture.

If you draw Volume Profile over the whole previous year 2019, then you can easily tell it is D-shaped.

A D-shaped profile tells us, that buyers and sellers are in a temporary balance.

So, 2019 was in balance and now the price gets very close to the low of previous year (heading outwards of the D profile).

In a case like that, it is more likely that the price will turn upwards and go back into the range of the D-shaped profile (back into the balance).

Why? Because around 70% of all the time, markets are balanced! I talk about this more in detail in my new Video Course.

EUR/USD, Daily chart:

Now, I am looking for some supports to go long from because I think EUR/USD is more likely to turn upwards again,

Best thing to do is to draw the Volume Profile over the price action area, where the price is heading now.

This means that in this case, I will draw the Volume Profile over the strong rejection of lower prices that occurred in November 2019. Because this is where the price is heading now.

I am looking for some significant Volume Cluster standing in the way (this would mean there is a volume-based support)

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The last volume-based support is breached

In this case, there is no Volume Cluster standing in the way!

The last one was around 1.0980. Price reacted to it several times, but then it got breached.

This means that now, no heavy volumes stay in the way!

This is important!

EUR/USD, Daily chart:

Does this mean that EUR/USD will drop?

Well, not necessarily.

AB = CD setup

There is one particular Price Action setup which I like to use and which often works like a charm. Especially on Daily time frame.

It is the AB = CD setup.

BTW I talk more about this setup more in this post from 4th February 2020:

AB = CD trading setup EXPLAINED

So, if you look on the Daily chart of EUR/USD, then you can notice a nice wave-like movement it did in the last +-30 days.

This wave-like movement created a very nice AB = CD formation.

EUR/USD, Daily chart:

This formation shows the point D which is exactly where the price is RIGHT NOW (1.0913).

The point is that if the EUR/USD is to turn upwards, then according to my analysis it needs to happen NOW!

If not, then I expect to see another sell-off of hundreds of pips.

Happy trading!

-Dale

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