Key Takeaways
1. Master Price Action: The Foundation of Successful Trading
"Price Action is the art of understanding the naked charts without any indicator."
Understand market dynamics. Price action reveals the true intentions of institutional traders who dominate the market. Focus on three key elements:
- Sideways price action areas: Where institutions accumulate positions
- Aggressive initiation activity: Strong trends indicating institutional buying or selling
- Strong rejections: Sudden price reversals showing aggressive counter-activity
By analyzing these patterns, traders can identify potential support and resistance levels, trend continuations, and reversals. This approach provides a clearer picture of market sentiment and potential future movements than relying on lagging indicators.
2. Harness the Power of Volume Profile for Precise Market Insights
"The most significant place in every Volume Profile histogram is the Point of control (POC)."
Leverage volume-based analysis. Volume Profile offers invaluable insights into market structure by showing volume distribution at specific price levels. Key concepts include:
- Point of Control (POC): The price level with the highest traded volume
- Volume clusters: Areas of significant trading activity
- Profile shapes: D-profile, P-profile, b-profile, and thin profile
These volume-based patterns reveal institutional interest and potential support/resistance zones. Traders can use this information to identify high-probability trade setups, such as:
- Volume accumulation setup
- Trend setup
- Rejection setup
By combining Price Action with Volume Profile, traders gain a comprehensive understanding of market dynamics and institutional activity.
3. Develop a Personalized Trading Style and Instrument Selection
"Did you know that many professional and institutional traders only focus on one or two currencies or only a few another trading instruments?"
Find your niche. Developing a successful trading approach requires identifying your preferred:
- Trading timeframe: Intraday, swing trading, or long-term investments
- Instruments: Focus on a select few that suit your style and strategy
- Risk tolerance: Determine appropriate position sizes and risk per trade
Consider factors such as:
- Liquidity and trading costs
- Instrument volatility and behavior
- Personal schedule and lifestyle
By specializing in a few well-chosen instruments and timeframes, traders can develop deep expertise and consistently apply their strategies with confidence.
4. Navigate Macroeconomic News with Confidence and Strategy
"I don't really care about 'yellow' (low impact) or 'orange' (medium impact) news because this news doesn't have that strong impact on the markets."
Adapt to market-moving events. Develop a systematic approach to handling macroeconomic news:
- Categorize news events by importance: weak red, standard red, and monster red
- Adjust trading strategy based on news category:
- Weak red: Potential to hold trades through the event
- Standard red: Close positions before the release
- Monster red: Avoid trading for extended periods
Implement practical tips:
- Use economic calendars to stay informed
- Develop a plan for unexpected news
- Consider indirect effects on correlated instruments
By understanding the potential impact of different news events, traders can minimize risks and capitalize on post-news opportunities.
5. Implement Effective Position and Money Management Techniques
"It is very important that you use the same position size for all your trades."
Protect your capital. Implement robust position and money management strategies:
- Set appropriate stop-loss and profit target levels
- Use either fixed or volume-based approaches
- Consider trailing stop-loss methods for maximizing profits
Key money management principles:
- Determine risk per trade based on account size and risk tolerance
- Maintain consistent position sizing across trades
- Consider correlation between instruments to avoid overexposure
By adhering to strict position and money management rules, traders can weather drawdowns and maintain long-term profitability.
6. Cultivate a Resilient Trading Psychology
"When you want to win a tennis match, you need to watch the ball. Not the scoreboard."
Develop mental fortitude. Successful trading requires mastering emotions and maintaining discipline:
- Recognize four types of trades: good winning, bad winning, good losing, and bad losing
- Focus on process over short-term results
- Maintain consistency in strategy application
Strategies for psychological resilience:
- Use a trading journal to track progress and learn from mistakes
- Implement a systematic approach to handling drawdowns
- Regularly review and refine your trading plan
By cultivating a resilient mindset, traders can overcome inevitable setbacks and maintain long-term success.
7. Avoid Common Trading Pitfalls and Embrace Continuous Improvement
"Jumping from strategy to strategy without really giving it any chance, time and patience won't lead you to a magic strategy."
Learn from mistakes. Recognize and avoid common trading pitfalls:
- Overreliance on indicators
- Using martingale strategies
- Overtrading or using excessive position sizes
- Failing to use stop-losses
- Following others' ideas blindly
Instead, focus on continuous improvement:
- Develop a structured backtesting and implementation process
- Gradually increase position sizes as you gain confidence
- Regularly review and analyze your trades
By avoiding common mistakes and committing to ongoing learning, traders can steadily improve their skills and achieve consistent profitability.
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FAQ
What's "VOLUME PROFILE: The Insider's Guide to Trading" about?
- Author and Background: Written by Trader Dale, a full-time trader since 2008, the book shares his journey and expertise in trading using Volume Profile.
- Focus on Volume Profile: The book emphasizes the importance of Volume Profile in understanding market dynamics and identifying trading opportunities.
- Educational Purpose: It aims to educate traders on how to spot institutional activity and use it to their advantage.
- Comprehensive Guide: The book covers various trading strategies, risk management, and trading psychology to help traders improve their skills.
Why should I read "VOLUME PROFILE: The Insider's Guide to Trading"?
- Learn from Experience: Trader Dale shares his personal trading journey, offering insights from years of experience in the market.
- Volume Profile Mastery: The book provides a deep dive into using Volume Profile, a tool that can give traders an edge by revealing where big players are active.
- Practical Strategies: It includes actionable trading strategies that can be applied to different timeframes and market conditions.
- Holistic Approach: The book covers not just strategies but also risk management and trading psychology, essential for long-term success.
What are the key takeaways of "VOLUME PROFILE: The Insider's Guide to Trading"?
- Volume Profile Importance: Understanding volume at specific price levels is crucial for identifying significant market areas.
- Institutional Activity: Spotting where institutions are active can provide valuable trading opportunities.
- Risk Management: Proper risk management is emphasized to protect trading capital and ensure longevity in trading.
- Trading Psychology: The book highlights the importance of maintaining discipline and managing emotions in trading.
How does Trader Dale use Volume Profile in trading?
- Volume at Price: Volume Profile shows where the most trading activity occurs at specific price levels, indicating significant support and resistance areas.
- Institutional Clues: By analyzing volume clusters, traders can infer where institutions are likely accumulating or distributing positions.
- Flexible Application: The Flexible Volume Profile tool allows traders to analyze any chart area, providing detailed insights into volume distribution.
- Versatile Tool: Volume Profile can be applied to various timeframes and instruments, making it a versatile tool for traders.
What are the main trading strategies in "VOLUME PROFILE: The Insider's Guide to Trading"?
- Volume Accumulation Setup: Identifies areas where institutions accumulate positions before a significant price move.
- Trend Setup: Focuses on volume clusters within a trend, indicating where institutions are adding to their positions.
- Rejection Setup: Looks for strong price rejections and uses Volume Profile to find the most significant volume areas within the rejection.
- Support and Resistance: Utilizes the concept of support becoming resistance (and vice versa) to identify trading opportunities.
How does Trader Dale suggest managing risk in trading?
- Fixed and Volume-Based SL/PT: Traders can use fixed stop-loss and profit targets based on market volatility or adjust them based on volume levels.
- Position Sizing: It's crucial to maintain consistent position sizes across trades to manage risk effectively.
- Avoiding Correlated Trades: Reducing position sizes when trading correlated instruments helps manage risk exposure.
- Alternative SL Approach: This method involves waiting for a candle close past the stop-loss level, providing flexibility in volatile markets.
What role does trading psychology play in Trader Dale's approach?
- Emotional Discipline: Maintaining discipline and sticking to the trading plan is crucial for success.
- Handling Losses: Accepting that losses are part of trading and focusing on long-term profitability is emphasized.
- Avoiding the Cycle of Doom: Traders should avoid constantly switching strategies and instead focus on mastering one approach.
- Learning from Mistakes: Keeping a trading journal helps identify mistakes and improve trading performance over time.
What are the benefits of using the Flexible Volume Profile tool?
- Detailed Analysis: It allows traders to analyze specific chart areas, providing precise volume distribution insights.
- Versatility: The tool can be used across different timeframes and instruments, making it adaptable to various trading styles.
- Institutional Tracking: By revealing where institutions are active, it helps traders align their strategies with market movers.
- Enhanced Decision-Making: The detailed volume data aids in making informed trading decisions and identifying key market levels.
How does Trader Dale recommend handling macroeconomic news in trading?
- Avoid Predicting News: The book advises against trying to predict news outcomes and market reactions.
- News Awareness: Keeping track of macro news release times is essential to avoid trading during high volatility periods.
- Post-News Trading: Traders should wait for volatility to settle before entering trades after significant news events.
- Reversal Trades: In case of strong news-driven moves, reversal trades can be used to align with the new market direction.
What are the most common trading mistakes according to Trader Dale?
- Indicator Overreliance: Relying too much on indicators can lead to delayed and inaccurate trading decisions.
- Martingale Strategy: Using risky money management strategies like martingale can lead to significant losses.
- Overconfidence in Trades: Believing too much in one trade can result in excessive risk-taking and potential losses.
- Lack of Stop-Loss: Not using stop-loss orders exposes traders to unlimited risk and potential account wipeout.
What are the best quotes from "VOLUME PROFILE: The Insider's Guide to Trading" and what do they mean?
- "It is the aggressive buyers/sellers with their MARKET ORDERS who drive the price up or down." This highlights the importance of understanding market aggression and its impact on price movement.
- "Retail traders like you and me make only 3.5% of all the trading volumes. The rest is institutions." Emphasizes the dominance of institutions in the market and the need to align with their activity.
- "By failing to prepare, you are preparing to fail." Stresses the importance of having a well-thought-out trading plan and sticking to it.
- "When you want to win a tennis match, you need to watch the ball. Not the scoreboard." Encourages traders to focus on executing their strategy rather than obsessing over short-term results.
How can I apply the concepts from "VOLUME PROFILE: The Insider's Guide to Trading" to my trading?
- Start with Volume Profile: Begin by incorporating Volume Profile into your analysis to identify key market levels.
- Focus on Institutional Activity: Use the strategies outlined in the book to spot where institutions are active and align your trades accordingly.
- Develop a Trading Plan: Create a comprehensive trading plan that includes risk management, position sizing, and trading psychology.
- Continuous Learning: Keep refining your skills and knowledge by reviewing your trades, learning from mistakes, and staying updated with market developments.
Review Summary
VOLUME PROFILE receives mixed reviews, with an overall rating of 4.02/5. Readers appreciate its clear explanations of volume profile trading, practical examples, and emphasis on price action. Some find it valuable for beginners, while others note its limitations for experienced traders. Critics point out typos, missing charts, and a perceived sales pitch for the author's services. Many readers value the book's straightforward approach and insights into institutional trading, though some question its applicability beyond forex and futures markets.
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