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

Trading With Extremely High RRR (Risk Reward Ratio)

I would like to show you a trading method which combines intraday trading with swing trading.

It is a highly efficient method with an extremely high RRR (Risk Reward Ratio).

Strike rate is not that high, but the big RRR makes up for it.

I am going to show you the method now, but first a warning: you will need to have the guts for this as it requires you to hold intraday trades as if they were swing trades!

Feel like you have the guts for it? Good! Let’s have a look at it!

Intraday analysis

The core of this approach is finding a strong trading level, which makes sense both as an intraday trade as well as a swing trade.

As an example, I will use a trading level, which I published for members of my trading course.

This level was a short on EUR/USD. I published it as an intraday trading level at 1.1087.

The reasoning behind the level was this:

There was a heavy volume area created in a price rotation. Then the price went downwards from there aggressively. This gave me the indication, that there were strong sellers building up their selling positions there.

I marked this level and I waited until the price returned to this level again. My idea was that those sellers would become active again, defend their selling positions, and try to push the price downwards again.

I call this scenario the Volume Accumulation Setup. You can learn more about it for example in this free webinar:

WEBINAR: Volume Profile Setups

Below is the 30 Minute chart on EUR/USD with this intraday trading level.

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Swing trade analysis

Let’s now have a look at this level from a higher perspective using a 4 Hour chart

(*in NinjaTrader software you need to set your chart to 240 Minute chart to get the 4 Hour chart):

There are two very important things in the picture above.

The first one is the heavy volume area in the middle of the downtrend. You can notice that it points you exactly to the same level as the intraday trading analysis.

This does not happen that often, but more often than you would think.

Another cool thing to support this trading level is that it worked as a support in the past. The price bounced off this level really nicely (that’s how you tell it was a support).

When the price went past the support, it then became a resistance.

You can learn more about this setup here:

Support → Resistance Price Action Setup

 

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Trade management

Now, we have a level which makes sense both as an intraday trade as well as a swing trade!

This gives us a nice opportunity to enter a swing trade using a very tight Stop Loss.

In a situation like this, you can use the Stop Loss as if you were trading a standard intraday trade. For forex pairs, this could be for example 10-15 pips.

What you do next is to open a standard intraday trade, but divide it in two halves.

You close the first half of the trade as is you were trading a standard intraday trade (for example after you made 10-15 pips profit).

Then comes the hard part!

You need to hold the second half of the position as if it were a swing trade!

This means your Take Profit could be for example 50-100 pips!

In this particular case, the ideal Take Profit would be 60 pips.

The reason for that is that there is a significant Volume Cluster standing in the way at 1.1028.

 

If you would like to learn more about placing your Take Profits using volumes (like in this example), then you can watch this free webinar:

Swing Trading Webinar

To sum it up – If you used TP=10 pips and 60 pips, and SL 10 pips, then you had 1st half of the position RRR = 1 and the 2nd half RRR = 6.

That is, if you had the guts to hold it!

I hope you like this trading method and I hope you will give it a try!

Happy trading!

-Dale

AUD/JPY – Swing Trade Analysis

In yesterday’s post I was talking about an intraday trading setup which you can use when market opens with a gap. If you missed it, then you can read it here:

Gap Trading Setup

Today, I would like to have a look at more long-term analysis which can be used for planning your swing trades.

Swing trading vs. Intraday trading

If I had to choose between intraday trading and swing trading, then my choice would be swing trading. The reason is that swing trading it is less time consuming, there are lower chances for you to make some sort of mistake, and also all kinds of trading instruments really nicely react to higher time frames (like Daily).

Today, I will analyze the AUD/JPY and I will use a Daily chart. Daily charts are my favorite for making swing trade analysis.

Price Action Analysis

Let’s first start with a simple Price Action analysis.

There were some pretty strong and aggressive rejections of lower prices. Two rejections were around 73.75 and one a bit lower, around 73.35.

When the price bounces off a level like this, then it means that the level was a strong Support or Resistance. In this case a Support.

It is always a good idea to watch how market reacts to such zones in the future.

Right now, the price is going aggressively downwards. A strong downtrend has started. In this downtrend, sellers dominate the market and the price just blew past those old Supports.

BTW if you would like to know how you could have predicted this downtrend, then check this out:

What happens when opening gap does not get filled?

In the picture below, you can see the Price Action analysis. It shows AUD/JPY; Daily chart.

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Volume Profile Analysis

So, what next?

In situation like this, I search for new Supports where the price could stop and turn it’s direction.

I search for those new Supports using the Volume Profile tool.

Essentially, I look for heavy volumes which are standing in the way – like in the picture below.

It is the same picture as before, only this time it is with Flexible Volume Profiles.

What you see in the picture are two heavy volume areas. First around 72.15, and the second around 71.40.

Rejection Setup (Support #1)

The first Support is based on a Rejection Setup.

There was a strong rejection of lower prices. Buyers took over, and pushed the price upwards.

There was a heavy volume cluster created within the rejection. In this area, the buyers who turned the price aggressively upwards, placed most of their buying positions.

This will be the place the buyers will defend when the price makes it into this area again (around 72.15). This means it is likely to work as a Support.

Volume Accumulation Setup (Support #2)

The second Support (71.40) is based on the Volume Accumulation Setup.

There was a rotation which was followed by strong buying activity (marked with the black arrow).

In this rotation, buyers were accumulating their buying positions. When they were done with this, they aggressively pushed the price upwards. The Volume cluster I marked in the yellow-blue rectangle is the place, where they placed most of their positions (volumes were the heaviest there).

When the price makes it back to this area again, then those buyers are likely to become active again and try to push the price upwards again. This means this area should work as a Support.

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Now we wait

So what now? Now we wait. It is that simple.

BTW this is why  I really like to trade with Volume Profile this way – I do a market analysis, find strong Support/Resistance zones, and then wait until the price comes to those zones. Only then I trade.

This method is highly efficient and I don’t need to spend too much time watching the charts all day long, waiting for a trade-entry signal.

I hope you guys like this!

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

Happy trading!

-Dale

JPY Strengthens and Creates a Swing Trading Opportunity

Today, I am going to do a swing trade analysis of CHF/JPY forex pair. I usually do swing trade analysis on a Daily time frame. This time frame helps me to see the big picture (which is needed for swing trading).

Trend Setup on CHF/JPY

The CHF/JPY was in a trend since the end of November 2019. Strong buyers were pushing the price upwards.

When I see a strong trend like this I use my Flexible Volume Profile tool and I look into the trend area.

What I want to see there, is a nicely visible Volume Cluster. In such a Volume Cluster, volumes are accumulated.

If there is an uptrend, then it means, that buyers were adding to their positions there (in this Volume Cluster).

When the price returns back to this Volume Cluster, then it usually works as a support/resistance.

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This is the case of the CHF/JPY.

Strong uptrend with nice Volume Cluster in the middle. When the price makes it back to this level again, then this Volume Cluster should work as a Support.

Why? Because the buyers who were pushing the price upwards and who were adding to their volumes there (in the Volume Cluster), will be defending their positions. So, when the price makes it back to this area, they will start aggressively buying and they will try to push the price upwards again.

You can see this on a picture below. The Support is marked around 111.70 area.

Resistance → Support Confirmation

So, now we have a Volume-based support. Is there anything else that would support this trading idea? You bet there is! My favorite confirmation Support becoming a Resistance (and vice versa) setup!

The price very nicely reacted to this level in the past. You can see it if you zoom out the chart a bit (we are still on the Daily chart):

This means, that the level was a strong Resistance. When the price went past the Resistance, it then turned into a Support.

The cool thing about this is that this Support is at our Volume-based level (around 111.70)!

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VWAP 1st Deviation

There is even more! One more confluence/confirmation I was able to find.

It is the Yearly VWAP. More precisely the 1st Deviation of the Yearly VWAP!

What’s that? It is the grey line (I highlighted it in yellow) which is slowly developing since the start of the year.

It is moving and developing, but right now, it is very close to our Volume-based Support zone.

1st Deviation of VWAP often works as a Support/Resistance itself alone. But when it meets with Volume-based level, then it is even nicer confirmation of the strength of the level.

Want to learn more about the VWAP? Then watch this short video:

VWAP introduction video

One Risky Thing About This

There is one thing which is a bit risky with this Support zone (I said it many times, there is no best, zero-risk trade).

The thing is how strongly the price turned a few days back, and also how strongly and aggressively it now moves downwards.

This is a sign of strong sellers. After those 2 months of uptrend, it seems that sellers took over (at least for now).

The question is: Who will be stronger when the price reaches the Support zone? The sellers who are currently pushing the price downwards? Or the buyers from the uptrend who will be defending their buying positions?

In my opinion, it will be the buyers who will be stronger in the end. The level seems pretty strong and we have two nice confluences to support it.

Why the JPY Strengthens? – Fundamentals

If you are curious, why the JPY is getting stronger, then it is because an uncertainty, or threat. JPY almost always reacts to uncertainty or threat like this.

Currently, the uncertainty/threat seems to be the Coronavirus, and the rockets hitting US embassy in Baghdad.

Strengthening of JPY is the initial reaction, but when this passes, it can as easily weaken back again.

Happy trading!

-Dale

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