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Here is my trade for tonight with explanation. I am moving toward Volume Profile trades. Basically trade the extremes and fade back toward the value area of the chart. If I am lucky I will get a trade which will go from one extreme to another.
I felt that we needed a thread dedicated to the discussion of Volume Profile.
Some basics, you can hover over these and click on most of them to get more info in the wiki. I also encourage you guys to improve the wiki articles by editing …
On the reversal of the first leg down price went the entire length of the volume profile before reversing. This third leg down stopped at the CLVN on todays chart which also matched with the CLVN of yesterdays chart. As of this writing the 4th leg up stopped at todays high and was reversing.
I was totally thinking like I used to the second trade and as a result I was stopped out. In order to play the extremes of the volume profile, you have to get in near the top so your stop is at or above the high/low. Instead I waited for a break. and got in about 8 ticks to low. The third was how it should be done. My stop was 15 ticks and was at the high of the day. For some reason I exited the 3rd trade early.. dont know why..
This will probably be it for me today. Ended the day with 22 ticks. +1300 on the day
So when you asked the question what is my A+ setup I didnt have a answer. Honestly it was a tough question. I had lots of setups but I didnt think any of them were A+. Actually when I started thinking about it I realized I didnt even have an idea what an A+ setup looked like. So in order to find a A+ setup I thought it best to list out my criteria. See below.
My A+ Criteria
The most I want to risk is 15 to 20 ticks
I want to be able to know when I am wrong about trade.
I want entries to be easily identifiable.
Stops should be logical and easy to define
Targets should be easy to identify.
Targets are not static.
Targets should be larger than my stop. Preferably 2:1 or better.
Low stress trade... in other words, easy to execute because I have confidence it will work over time.
I started breaking down my setups and trying to figure out what was the best but all of them were pretty bad. I decided to throw out and started thinking outside my comfort zone. I worked with a trading buddy on a couple of setups and went through various other setups here on nexusfi.com (formerly BMT) and elsewhere and finally found one which met the criteria I was looking for:
My A+ setup.
Using volume profile I find entries where price is near the top or bottom of the volume profile. I look for a trend line break or double top, etc to identify the entry and fade price back into the value area of the chart. I use low volume nodes to identify potential exit areas and place my target 5 to 10 ticks away from the LVN. See chart below and previous posts from this week for visual explanation.
Advantages of this setup:
I am using the theory that price moves back to value to my advantage.
This strategy can be used on nearly every market
Because of the potential size of the moves I will be able to incorporate pyramiding into the trade and be able to increase profits.
It meets the criteria above.
I don't have a problem pulling the trigger on a trade.
Very simple, very repeatable, low stress and it takes care of my problem areas and allows me to just trade.
The next steps; execute the setup, continue to learn more about VP and be mindful of how I am managing the trades in order to maximize my profits.
Focus today was to take trades and hold them. Taking the trades - Passed. Hold the trades - Failed. Last trade is the one I should have held. It went another 50 ticks after I exited the trade. I took the exit because it was near a low volume node and I thought it might reverse. This was a valid exit but this was not my original target. I should have moved my stop to BE or slightly above and let the trade play out.
Need to review my stops and entries and possibly make an adjustment. Second time in a week I have been stopped out by a tick only to have it reverse and go my direction.
Edit:
Past lessons learned - I got burned once leaving a trade unattended so I dont do it anymore. Thus I cut this trade short since I was going to be out of the office. Its hard to tell from screenshot but there were 5 bars in the in the low volume area of the chart. It produced hardly any volume.. When volume dries up like this it indicates a bottom/top. . My original target was 50 ticks. It ended up going 68. This was a good trade and one I wish I could have been in till the end.
