VOLUME PROFILE: How to Trade Point of Control (POC)

Hello everyone, it's Dale here. In this video,  I'll show you how to use volume profile,   which is a powerful tool that reveals where the  big players are trading. And more importantly,   we'll focus on the most critical level on the  chart, which is point of control. And here is what   you will learn. You will learn what volume profile  actually shows and how to read it. You will learn   why point of control is the most powerful support  and resistance level on your chart. You will learn   how to trade the point of control both the basic  and more advanced way and just as important when   not to trade the point of control. I'll walk  you through real trades from my own account,   show you my exact strategy and also what to do  when the point of control fails because let's   be honest, it doesn't work every time. And before  we wrap up, I've got a small gift for you. But you   need to stay until the end. And don't skip. So,  let's get to it. And let's start with a little   quiz so you guys know where you are at. Okay.  So, take a look at this picture right here on   your screen and tell me where the price is going.  Is it going to go up or is the price continue to   fall? It's pretty hard, isn't it? when you look  just at this chart. Pretty hard to tell. Okay,   let me help you a bit. This is the same chart only  what I've added is daily volume profiles. Now,   the same question. Will the price go up or down?  Okay. So, if you look at the volume profile,   this one, then right here, this is the point of  control. the price hit that point of control and   made a reaction to it. As you can see with a plain  chart, plain price action chart, it it was rather   hard to guess where the price is going to go. But  with volume profile, it's actually very easy level   to spot, right? Because this is point of control.  And if you guys don't understand a thing from   what I'm showing you now, don't worry. We'll get  to it. But you know this is just a little quiz   to get us started and to see where you are at.  Okay, second question and it's the same question   as before. Where is the price going to go? Up or  down? Again, if we don't have the volume profile,   it's quite hard to tell, right? Just looking at  the price. But if we add the volume profile here,   then you can see that the price just hit the  point of control which is in here. The price   just hit the point of control level. So up we go.  Right? This is a reaction to the point of control.   Now let's rewind a bit and let me start from the  beginning. Uh let me do a little introduction to   what the volume profile is and then we'll continue  to you know the setups that I use to trade the   point of control. So volume profile is basically  a histogram that shows volume at price. So if you   look at the volume profile, this is it. And the  wider the volume profile is. For example, here the   heavier volumes were traded at this price level.  Right? This is called the point of control. This   level where the heaviest volumes were traded. And  essentially what the profile is showing you is how   the volumes were distributed throughout the whole  day. So heaviest volumes were in here. Then there   is area where there were some low volumes. So at  this price level, nobody was sort of interested   in trading here. Same goes for this area, right?  But this is the most important area because many   people were interested in trading at this uh  price level. All right? So volume profile shows   how volumes uh are distributed throughout the day.  If it's a daily profile, if it's a weekly profile,   then it will show how volumes are distributed  throughout uh throughout the whole week. If   it's a monthly profile then throughout the whole  month and as I was saying the point of control   that's the place where the heaviest volumes were  traded this is the point of control and today we   are going to talk about that the volume profile  can have many shapes those are the four most   basic ones but always the most important place  in each shape is the point of control right So   this is something called D-shaped profile because  it has shape of a letter D and right here this is   its point of control. If you look at the B-shaped  profile then the point of control is somewhere in   here. With a P-shaped profile you can see that  the heaviest volumes were traded in here. So the   point of control is in here. And then with  a thin profile sometimes it's a bit hard to   tell especially if there are a couple of volume  clusters like here. But I think looking at this   profile that the point of control the heaviest  volumes were traded right here. So in this case   this is the point of control here. Right? So every  volume profile has point of control no matter what   the shape of the volume profile is. Right? No  matter how the volumes are distributed throughout   the whole day and in each of those shapes the  point of control is the most important place.   So as I was saying point of control is the most  important place on any chart. The reason for   that is that through volume profile you basically  track the big trading institutions right the big   guys the guys who move and manipulate the markets  right and the point of control the place where the   heaviest volumes were traded. This is basically  the place where the big trading institutions   were most active where they placed the most of  their trades, right? So that's the most important   place on the chart and as you guys probably know  institutions move the markets and if you guys know   where they are positioned then I believe that you  are ahead of 99% of retail traders. It's kind of   interesting because professional traders so many  of them almost majority of them I would say are   using volume profile at least as some addition  to their trading strategy. Institutional traders   also use volume profile. Like this is a standard  tool of a professional trader. But if you look   at retail traders, not so many of them actually  use volume profile. So what I'm trying to say is   that even if you just place the volume profile on  your chart, if you use simple daily profiles and   you just look at where the point of control is,  then if you do just this, you'll be still ahead   of most retail traders, right? Because you'll see  something which they simply don't which they can't   see if they don't have the volume profile.  Now, in this video, we focus on the point of   control. And if you are an intraday trader, then  you'll probably be interested in a daily point   of control, you'll be trading that. If you are  long-term trader, then probably it's going to be   uh for example yearly or monthly point of control.  Let me actually show you. Let me go to the chart.   All right. So, uh this is a intraday chart, a 30  minute time frame. If you look here, I have daily   profiles, right? Every day one profile and this is  the daily point of control in here. Then there's   daily point of control in here. Then there's  daily point of control in here. And if you're   a day trader, you are going to be interested  probably mostly in the daily point of control,   right? The place where most volumes were traded in  a given day, right? But on the other hand, if you   are for example long-term investor, then you know  you'll use workspace for example like this. This   is my swing trading workspace where I trade on  the daily charts. And in here I have yearly volume   profiles. Right? So if I trade point of controls  here then I'm interested in this point of control   which is point of control of the whole year. I'll  be interested in this point of control because   this is current year point of control. Right? So  depending on the time frame you trade, you should   think of what kind of volume profile you actually  want to trade. Most of you are probably going to   be intraday traders. So we are going to focus  mostly on trading daily point of control which   you can see right here on this intraday trading  workspace. Now the reason why I'm shooting this   video and why point of control is so important  is that because it is a strong support and strong   resistance level. Right? As I was saying, point of  control is a place where institutions placed most   of their trading orders. Right. So if you look at  this picture at this daily volume profile and the   point of control in here, then what you basically  want to do is that if price revisits this place   in the future, makes a pull back to this place in  the future to this level to the point of control,   then the institutional traders who are active  in here, who created this point of control,   will become active again. They'll defend this  place and they're likely to push the price up   from here. This is a long trade scenario.  Long trade scenario would look like this,   right? Pull back from below the point of control  and then you go short from the level. So basically   the logic behind what I'm going to show you is  institutions defending the place where they were   active before which is the point of control.  Okay. So let me show you long trade scenario.   Let's take a look at this volume profile. It has  a very nicely visible point of control which is   right here at this level. That's the point of  control. Let me draw a line here. The price went   up from this point of control made a pullback to  it and then the buyers who are active here those   institutions started to buy aggressively defend  the long positions which they placed in here and   result is that the price went up. All right. So  that's the long trade scenario. A short trade   scenario is take a look at this profile and the  heaviest volumes in this profile right here. This   is where the volume profile is the widest and this  is the point of control. And take a look at this.   Price made a pull back to this level. And then the  sellers who are active here, those institutional   sellers started to sell and that resulted in the  price going down. Right? So this is the short   trade scenario now. Here is a guide how exactly to  trade the point of control. So the first step is   identify the point of control. That's easy.  That's where the volume profile is the widest,   right? So it's this level. This is the point of  control. Then you want to wait for the price to   move away from the point of control. Let's say  that it goes up and then you wait for a pullback.   This is the pullback. And then you enter the trade  at first touch. That means you go long from here.   And you also want to trade only the first test.  Right? That's at least how I trade this. I only   traded the first test because in my opinion and  experience uh they have higher probability of a   successful reaction. A short trade scenario would  be again uh you mark the point of control and if   the price goes down from the point of control you  wait for the pullback and when the price hits the   point of control you go short. Right? This is the  short trade scenario. Now what I actually do and   what I currently prefer is an alternative method.  It's very very similar only you don't place the   trade entry at the point of control but at the  beginning of the volume zone. Let me show you.   uh because the way I look at it is that the  support or resistance is not just the point   of control line but it's the whole heavy volume  zone where the point of control is. So in this   case this would be a whole support or resistance  zone. Let me do a little drawing here. This is the   whole zone right? Support or resistance zone.  Not just the point of control but the volumes   around it too. So if the price goes up from there,  makes a pullback, then I don't actually place my   trade at the point of control line, but I place my  trade at the beginning of that heavy volume zone,   which is here. This is my long trade entry at  this place. Uh the reason is that I started to   notice that I'm missing many trades. Uh when I  was trading from the point of control from that   level exactly I was missing a lot of trades. Many  times the price just reacted a little bit sooner.   So I started to place uh the level the entry level  at the beginning of that heavy volume zone and my   results improved a lot. So this is a little you  know tweak to that strategy that I'm currently   using and it works nicely for me. So this is  long trade scenario. Uh short trade scenario   would be if the price went down from that point  of control made a pullback then the short would   be from here from the lower border of that heavy  volume zone. Right? So that would be the short.   All right let's get to some examples. So first  take a look at this volume profile. It has point   of control in here. So let me draw a line there  at the point of control. And what you do is you   wait for the price to move away from that point  of control. In this case it goes downwards. That   means sellers are in control. So it was sellers  who were active in here accumulating their short   positions here. Then those sellers push the price  downwards. And currently we have the information   that at the point of control there are strong  sellers, right? So we wait for the pullback.   When price hits the point of control for the  first time, you hit the short and that's it.   There's also one more here. Take a look at this  profile. It has point of control right here. The   price moves away from the point of control, makes  pullback to it. And this is where you enter short.   Right? So this is a short trade scenario. Now here  we have a long trade scenario. Take a look at this   daily volume profile. The point of control is  right here. Draw the line and you need to see   the price move away from the point of control.  make a pullback to it and when it hits your level   then you go long from there. All right. So that's  the long trade scenario. From here you go long.   Now in this example take a look at this volume  profile right here. And the point of control   is here. Now let me show you something. If you  are trading from the point of control like this,   then this would be the pullback. You'd be looking  to go long from here. But as you can see, the   price missed that. And this is actually what was  happening to me so often. And that's why I started   to trade from the beginning of the heavy volume  zone. So the way I trade this is I place the   level a little bit higher to the beginning of that  heavy volume zone which would be somewhere in here   and actually go long from this place. As you can  see price hit that level and immediately went up.   Right? So beginning of a heavy volume zone did the  trick. All right. Now, this is the same chart only   zoomed out a bit. And I want you to take a look  at this profile. It has the point of control right   here. And if I extend the point of control like  this, then you can see that after the pullback,   this would be where I would be looking for long.  But yeah, the price just missed that. It would   be missed trading opportunity. At that point, I  would just discard the level. But as you now know,   the way I trade this is I place the level at the  beginning of a heavy volume zone. So it would be   somewhere in here because this would be the area  where the heaviest volumes were traded. So I would   place my entry somewhere in here and it would  be a winner. Right? So this is exactly why I've   altered the strategy a bit so I don't miss trades  like these. All right. Now, what I wanted to show   you is when not to trade the point of control  because this is also very important knowing when   a strategy does work and when it does not because  there's no strategy that would work all the time,   right? So, when not to trade the point of control.  When you notice that the market is going sideways   in sideways price channel like here then you  don't want to trade the strategy of point of   control pullbacks uh that I just showed you. The  reason is that point of control in a rotation is   usually somewhere in a around the center of the  rotation. So this is the point of control of the   first profile. Second profiles point of controls  is in here. Then there's point of control in here.   The last profile has point of control in here.  So as you can see, it is somewhere around the   center of that rotation channel. Right?  And when the market is moving like this,   what you want to do, you want to trade from  the borders of the rotation, longs from here,   shorts from here towards the center of the  rotation. And the center of the rotation, the   point of control is actually a nice place where to  take your profit. When you are going, for example,   long from here, then the point of control is good  place uh for the take profit, right? It's not a   support or resistance when the market is rotating.  In this case, it works as sort of a magnet. The   price is moving around it and the point of control  is around the center. Right? So, this is where not   to trade the point of control strategy. In this  case, you want to use the point of control as a   takerit. Now, talking about take-profit, we also  need to cover takerit and stop-loss placement for   our strategy. Right? So uh the rules are very  simple. Let me show you. Take a look at this   profile. This is the point of control. So again  what you do according to the strategy you print a   line here on the chart, wait for the pullback and  when price hits the level then you go short. Right   now let's discuss the stop-loss placement first.  Stop loss needs to go in low volume area where   nobody really was interested in trading. Right? So  take a look at the profile and the low volume area   would be in here. This red line, perfect spot for  the stop loss, right? Because this is the heavy   volume zone and this zone is a resistance.  The whole zone is a resistance like this. And you want to place the stop behind that  resistance because if the price goes past   the resistance, there's no way of telling where  it will go next, right? So that's where you want   to cut your losses. So remember, stop loss needs  to go behind a heavy volume barrier like in here.   Now talking about the takeprofit, you want to take  the profit before the price reaches heavy volume   zone. So if you look at this profile right here,  this is a heavy volume zone and that heavy volume   zone could potentially represent a strong support,  right? This could represent a support. And when   you are short from here, you don't really want  the price to hit a support and ruin your trade,   right? So when the price hits the beginning of  the support, which is here, this is where you   take your profit, right? At the beginning of the  heavy volume zone. So again the rule for the stop   loss is stop loss goes behind a barrier behind  a barrier and take profit goes before a heavy   volume barrier right simple rules. Now let me  give you one more example to demonstrate this.   So take a look at this profile right here. Nice  P-shaped profile with point of control in here. If   you are trading with uh the alternative strategy  that I currently prefer, then you want to place   the long level a little bit above the point of  control at the place where the heavy volumes are   beginning. So this would be the long trade entry  and stop should go behind this heavy volume zone.   So this red line is stop loss because this is  the low volume area, right? So the stop loss   goes behind heavy volume zone according to our  rules. And now when the price reacts to our long,   we need to look for place to quit the trade.  And if you look at this profile, nice D-shaped   profile, then it has heavy volume zone with point  of control in here. The beginning of this heavy   volume zone is right here. And there's a chance  that the price will react to it like this. You   don't want that when you are long, right? So  that's why you quit your trade in here when   the price reaches this barrier because the risk is  that it will react to the barrier. In this case,   it did not react, but it could have. And that's  why you put the trade in here. Right now, let me   demonstrate this on a couple of more trades. Those  are real trades which I publish for members of my   trading course every day. Those levels that I  publish for them are published in advance so   everybody can trade them with me. So let me now  show you a couple of them to demonstrate how we   uh trade the point of control. So this is a recent  trade we took on the ENQ. Um take a look at this   profile here. The point of control was right  here and our level where we went long from was   this line. The market opened with a gap. Then  the price went up from that point of control,   returned back. It was rather quick and from there  reacted. We went long here and the price went up.   The stop-loss placement regarding to the rules  which I showed you uh should be in here in this   low volume area. But what I've done instead,  I placed it a little bit lower because I want   the trade to breathe and I placed it below  this low. So I placed the stop in here. And   regarding the takerit, if you look at this volume  profile, this one, this was the point of control,   the place where the heaviest volumes were traded.  And this was where I took the takeprofit, right?   Because I didn't want to risk it. I didn't want  to risk that the price will react to the point of   control and go downwards again, right? So that's  why the take profit was in here. As you can see,   this is more or less riskreward ratio. one trade.  My rule for this is that I want to trade at least   with risk reorder ratio one. All right, that's  the minimum. So this was risk reorder ratio one   trade and yeah, this is how it went. Uh let me  show you one more. This is a trade which I took   recently on the US dollar Japanese yen. This is a  30 minutes chart daily profiles. And if you look   at this profile, then you know there's a point of  control that stands out very nicely. This is the   point of control. And again, I like to trade from  the beginning of that heavy volume zone where the   point of control was formed. So it was this level.  The price moved away from that point of control,   made a pullback and this is where the price  hit that level. And at first touch, this is   uh where I went short. The stop loss for this  trade was in a low volume area. It was in here. And the takerit was based on heavy volume zone  standing in the way and it was this heavy volume   zone. So that's why the takerit was in here.  It was a trade with positive risk-to-reward   ratio. So, it was quite a good trade. Okay,  last one, last example. This is US dollar,   Canadian dollar. And take a look at this profile  here. This is where the heaviest volumes and   the point of control was. I was trading from  the beginning of that heavy volume zone. So,   this was my trade entry. Went short from there. My  stop was in here. If I extend this line, you can   see that it was behind this heavy volume zone. So,  behind this barrier. And regarding the takerit,   I actually didn't have a heavy volume zone  standing in the way. So, I was looking for some   different barrier that would stand in the way of  this trade. And uh there was a weekly VW up here.   That's the blue line. So, I quit the trade when  the price hit the weekly VWAP. By the way, VWAP is   also a good place for uh taking profits like this.  But, uh that's another topic for another video. Uh   this is how the trade went. This is where I took  the profit. If I only had the patience, I would   actually be able to quit the trade before it hit  the first heavy volume barrier. The price actually   reached this place. So, it would be like insanely  nice trade if I managed to hold it that long. But,   you know, I'm not like that. I probably wouldn't  be able to hold that trade that long. So, that's   why I was searching for a closer place where the  quit the trade and it was the VWAP. Right? If I   had the patience, then I would, you know, follow  the rules and just quit the trade when it hit   the heavy volume zone in here for me. That would  be probably just, you know, too much to handle.   Anyways, as I was saying, those levels are levels  which are every day in the members area. I do   updates every day and all the members have access  to them and they know where I will be trading that   day. Uh I give them the levels in advance. So they  have hours and hours, sometimes even days before   the level which I marked for them to trade gets  hit and before you know they can trade it with me.   And if you guys want to join us and get a volume  profile trading education, get my indicators,   get access to my daily levels and swing  trading levels, get access to our tech support,   then visit our website. It is traderdale.com. If  you click trading course and tools, then it will   take you to this page and in here you can get one  of my educational and indicator packs. If you're   interested in volume profile trading, then go for  the volume profile pack which includes the volume   profile course. That's like 15 hours of volume  profile training. It includes my trading signals   every day. Includes my custommade volume profiles  for various trading platforms like Ninja Trader,   Metatrader or Trading View. So you can get that  and join our members and uh we can trade together.   And if you guys are interested in trading with  me and other proper traders every day in the live   trading room, then you want to click the FTA  button. It stands for Funded Trader Academy.   Here's a page where you can learn more about the  Funded Trader Academy. You can book a call with us   and uh we'll explain the service and then you can  decide whether or not uh this is right for you.   But let's now go back uh to the presentation  because there is something very important which   I wanted to show you and that important thing  is what to do when the point of control fails   because so far I've been showing you nice  scenarios and nice traits where the point   of control worked like a charm right but let's be  real it doesn't work like a charm all the time so   um if point of control fails that means  that the there is a change of sentiment   And what you can do is you can take a reversal  trade. Reversal trade is that you trade the   same point of control again but from the other  side. Let me show you. It will be easier if I   do a little drawing here. Um take a look at this  profile. Nice D-shaped profile, right? The price   moves away from that point of control. That's  the point of control line. moves away from it,   hits the point of control in here and this is  where you go short. Right? As you can see, it is a   losing trade. So, the point of control failed. The  price shot past that level. Now, what comes into   play is the reversal trade. You extend this line a  bit. Wait for the pullback and at the same level,   the same point of control, you enter a reversal  trade, which in this case is a long. That's the   reversal trade. You would be surprised how often  this works and how often this reacts to the pip   to the point of control. Right? So what I'm always  saying to my students is point of control just by   itself is very very strong level. If the price  doesn't respect it and just shoots past it,   it is a very very important information. It  doesn't really mean that the point of control   was a bad level to trade. It simply means that  buyers are stronger. They pushed through and that   the sentiment changed and we need to adapt. Right?  So that's why you wait for the pullback and very   very often the market gives you the chance to  enter at that level again right very very often   there is that pullback and this is the reversal  right if you previously went short took a loss   then reversal would be taking a long from the same  level from the same point of control let me give   you one more example of this take a look at this  profile Here this is the point of control, right?   Price moves away from the point of control, makes  a pullback, you go long and take a loss. The price   shoots past the level with no reaction at all. So  what you do is you wait for the pullback and when   the market gives you a chance to jump in a new  short from here, then you should do it. As you can   see, this would be just the perfect chart, right?  So, this is the reversal trade. Ideal scenario is   when the price shoots past the point of control  very very quickly with no reaction at all. Even   you know could be for example during macronuse.  It's completely fine if it shoots past your level   in macron right. So, this is the point of control.  The price shoots past it. ideal scenario that you   know this is aggressive candle huge candle could  be macronuous candle that's fine if there's no   reaction at all that's perfect scenario for  the reversal right now let's do a very very   brief summary of uh what we talked about today  right so point of control you should remember   that it's the most important place on the chart  because it shows where institutions are positioned   Because of this, it works as a strong support and  resistance zone. And the way to trade this is you   want to trade pullbacks to the point of control.  This is a long trade scenario pullback. This is   a short trade scenario pullback. Next thing to  remember is that you shouldn't trade the point of   control when the market is in rotation because in  this case the point of control works as a magnet,   not as a support and resistance. And last but not  least, if point of control fails, then you take a   reversal trade, right? So if this is the point  of control, price goes up, makes a pullback,   you go long, but the price continues to go down.  Then you wait for a pullback and go short from   there. This is the reversal. All right, guys. So  that's about it. And here is a little gift as a   thank you for staying until the end of the video.  Uh this is my bestselling book, Volume Profile:   The Insiders Guide to Trading. And uh I'm giving  away free physical copies, and I'll even cover the   shipping. It's a gift from me to you for staying  until the end. I'll keep sending the books until   they run out of stock. And if you are in the US,  just click the link below, fill out the form,   and I'll send it to you. No strings attached.  Just enjoy the book and let me know how you like   it. All right, so that's about that. Thanks for  watching the video. Thanks for sticking until the   end and I'll be looking forward to seeing  you next time. Until then, happy trading.