Video summary

How to Use Volume Profile and VWAP to Trade Pullbacks

Main summary

Key takeaways

Technology

Main Idea (Pullback Trading with Volume Profile + Anchored VWAP)

  • Volume Profile is used to locate price levels where heavy trading volume occurred, suggesting where large market participants/institutions were active.
  • After identifying a heavy-volume level within a prior rotation, the trader marks a “fair price” using Anchored VWAP (anchored view up) around that area.
  • The strategy looks to trade pullbacks back to support/resistance created by VWAP, but only when the market is trending (not during sideways rotation).

Step-by-Step Logic

  1. Find heavy-volume zones on the Volume Profile

    • Look for a rotation where volume is concentrated (the rotation’s heavy-volume area).
    • Treat this region as where institutions accumulated positions.

  2. Require strong trend follow-through

    • The heavy-volume zone should be followed by a strong trend move (uptrend or downtrend).
    • The start of that sell-off/breakout is considered important for anchoring.

  3. Anchor VWAP to a specific candle

    • Anchor VWAP at the last candle of the rotation, typically described as the first candle of the sell-off (often shown as a large red candle in the example).
    • The speaker notes that slightly changing the anchor candle doesn’t materially change VWAP.

  4. Avoid trading during rotation / consolidation

    • While price is still rotating, the speaker says VWAP setups don’t really work.
    • Instead, wait until price transitions into a directional move.

  5. Trade pullbacks to VWAP-defined levels

    • If bullish: the VWAP level can flip from resistance to support after price moves above it; then enter longs on pullbacks.
    • If bearish: sellers are expected to sell at the fair price (VWAP); then initiate shorts when price hits VWAP, often using multiple tests.

Examples Provided

Example 1 (Short Setup Logic / Down Move Then Pullbacks)

  • Identify heavy volume within a rotation.
  • Strong trend activity begins at the sell-off candle; VWAP is anchored there.
  • Trade concept: short from the fair-price region (VWAP area).
  • During the rotation phase: don’t trade.
  • Later: VWAP acts as support/resistance depending on direction.

Example 2 (Downtrend Continuation)

  • Heavy volume zone → strong downtrend begins.
  • VWAP anchored at the candle marking the start of the sell-off.
  • Entry rules: wait for price to move away from VWAP, then enter on pullback (shorting on pullback toward fair price).

Example 3 (Asian Session / Lower Volatility Note)

  • A massive-volume rotation followed by strong sell-off suggests sellers built short positions before pushing price down.
  • VWAP is treated as fair price: short when price reaches VWAP.
  • Constraint mentioned: movement was muted because it occurred during the Asian session (low liquidity/volatility), so reactions were slower.
    • The speaker says they’re willing to hold for a couple of hours.
  • A second test is also mentioned (another chance to short near VWAP).

Additional Guidance / Promotion

  • The video closes with an invitation to learn more about VWAP and volume profile trading, referencing:
    • traderdale.com → “trading course and tools”
    • Mentions trading education packs and custom-made indicators.

Main Speaker / Sources

  • Main source: The video’s host/speaker (branded as traderdale).
  • Website referenced: TraderDale — traderdale.com.

Original video