🎯Trade of the Week | Turning a Loser Into a Winner

Hello everyone, it’s Dale here with a new Trade of the Week video. In this video, I would like to talk about a trade I took last week on GBP/USD. I must say that last week was a very good week for me, but I did take one loser on GBP/USD. In this video, I’d like to talk about this losing trade because I think there’s a lot to learn from it. So let’s check it out.

What you see before you is the NinjaTrader 8 platform with my custom-made Volume Profile and VWAP indicators. This is a 30-minute chart of GBP/USD, and the level I was trading was this one—the blue line. This level was a long setup based on heavy volumes, which were traded here before this strong buying activity. But it was not just the volumes here. If you move the flexible profile like this, you can see that massive volumes were actually traded in this whole area, and from there, strong buying activity started.

My original analysis was that strong buyers had been accumulating long positions here and then pushed the price upwards. So I thought those buyers would defend this level and push the price upwards again. I waited for the pullback and went long from there. I think it was a solid level to trade from. But what the price did was go straight past the level with no reaction at all. Within a couple of moments, my stop loss was hit. There was no reaction, and that was it.

My stop was right here, 11 pips. I placed it there because I wanted it behind the heavy volume zone. That’s how I always place my stops. But as you can see, the price immediately went down and hit the stop loss. If it had ended like this, there wouldn’t really be anything interesting in this trade. But here’s the part I wanted to show you—something I call a reversal trade.

A reversal trade is when you take a losing trade, the price goes straight past your level with no reaction, and then you wait for a pullback to the same level to enter in the opposite direction. Originally, I went long here and took a stop loss. Then, when the price pulled back to the same level, I entered short. That was the reversal trade. So first I had a loss, but then the reversal trade was a winner. Actually, I made more on the reversal trade than I lost on the first one, so in the end, I finished in profit.

One important rule about reversal trades is that the price really needs to shoot past your level—like a strong Volume Profile level—with no reaction at all. If it does that, then it’s an ideal candidate for a reversal trade. Think about it: this was a very strong level to trade from. Heavy volumes and significant activity like this should create at least some reaction. If it doesn’t, it’s telling you sellers are dominating and buyers completely lost control. When sellers push the price through a strong level like this, very often you get the chance to jump back in at the pullback. The price often returns to the level, giving you the opportunity to enter the reversal and take another trade.

Let me show you this on the one-minute chart, because it’s not as clear on the 30-minute chart. On this one-minute chart, the blue line marks where my long level was. The price went past it with no reaction, I got stopped out, and then the price returned to that level. This was where I entered short—the reversal trade. I took profit at the beginning of this heavy volume zone. That was my take-profit. I like to exit at the beginning of some kind of barrier—ideally a Volume Profile barrier. On the one-minute chart, this heavy volume zone was that barrier, which is why I exited there.

The profit was around 13 pips. On the long trade I lost 11 pips, and on the reversal I gained 13. So overall, the result was positive.

That’s the reversal trade. When the price goes straight through your level with no reaction at all, that’s the ideal opportunity to wait for the pullback to the same level and take the opposite trade—a reversal.

That’s about it, guys. I hope you liked the video. If you want to join us, trade with me every day, and get access to my custom-made indicators like Volume Profile, VWAP, and Order Flow, head over to my website: Trader-Dale.com. Click “Trading Course and Tools” where you can browse my trading education and custom trading tools. You can get them in four separate packs, or scroll down and get all four together in a discounted bundle.

Thanks for watching and see you next time. Until then, happy trading.