Video Transcript:
Hey guys, it’s Dale here. In this video, I’d like to quickly show you how you can use Volume Profile and Cumulative Delta together for a very effective trade setup. I’ll demonstrate this using a trade I recently had on the USD/CAD. What you see before you is the Canadian Dollar futures (6C) 30-minute chart. If you look at the Volume Profile, I have a cumulative Volume Profile that shows how volumes are distributed throughout the entire week. This is a weekly Volume Profile.
The most important area in any Volume Profile is the Point of Control—this is the level where the heaviest volumes were traded. In this case, the Point of Control is here, within this heavy volume zone, which caught my attention. The blue line you see here represents a resistance level I wanted to trade from. It’s located at the beginning of the heavy volume zone where the Point of Control was formed. Once you identify this, you want to look for a pullback; that means waiting for the price to return to the Point of Control level. When the price reaches that level, you should then examine the Cumulative Delta. Let me switch over to the Cumulative Delta chart to show you how it was developing when the price approached the weekly Point of Control.
What you see here is a one-minute price chart, and below it is the Cumulative Delta chart. The blue line represents the resistance level I showed you earlier on the Volume Profile. As the price moved upward towards this level, the Cumulative Delta was dropping. This divergence is crucial—it indicated that sellers were in control even though the price was rising. Sellers were actively entering the market. At this point, I didn’t take any action. I simply observed this divergence and waited for the price to hit the resistance level. By then, I knew I wanted to take the trade because of the clear divergence between the price and Delta.
Now, moving forward, this is where the price hit the resistance level. At the same time, the divergence persisted—price was still rising, but Delta continued to drop. This marked the end of the trading day. Let’s see how the price reacted to this level. Moving ahead, I’ll switch the chart to the next day. As you can see, the price finally reacted to the resistance level, and Delta also began to drop. At this point, the Delta and price were in alignment. Typically, price follows Delta, meaning if Delta decreases, the price should also decline. However, the key takeaway here is the initial divergence between the price and Delta as the price approached the level. This divergence was my confirmation to enter at the Weekly Point of Control level, identified using the Volume Profile.
Now, let me show you how I managed this trade. I’ve already closed it, so let’s return to the 30-minute chart. Forwarding the chart, you’ll see where the level was hit and the price reaction occurred. I exited the trade right here, at the first deviation of the weekly VWAP. When the market is trending, price often reacts to the first deviation of the VWAP, as it did here. For example, earlier, the price was above the first deviation, pulled back to it, and then reacted. The first deviation is the gray line you see here. That’s why I exited the trade when the price hit that gray line. I didn’t want to risk staying in the trade due to the potential for a reversal.
Additionally, there was a small Fair Value Gap nearby, which added further risk. Price often reacts to such gaps, and this gap’s bottom posed another potential turning point. With too much risk of the trade moving against me, I decided to exit at this point.
This is how you can use Volume Profile and Cumulative Delta in your trading. As you can see, it’s very straightforward. First, identify a heavy volume zone. Then, when the price approaches that zone, look for divergence on the Cumulative Delta. That’s it!
I hope you enjoyed this quick trade breakdown and found the Cumulative Delta strategy helpful. If you’d like to elevate your trading and join me, along with other funded prop traders, in a live trading room every day, head over to my website, Trader-Dale.com. Click the button labeled “FTA” which stands for Funded Trader Academy. There, you’ll find a video that explains everything about our academy and how we can help you become a professional prop firm trader in a highly effective way.
Thanks for watching! Don’t forget to like and subscribe. I look forward to seeing you next time. Until then, happy trading!
