Original subtitles

In this lesson we're going to speak about

a specific type of shaped volume profile

a specific...

called a D-shaped profile. This particular

shape profile for us intraday traders is

quite important to recognize and

understand how to approach. So this is

called a D-shaped profile. Now a D-shaped

profile gets its name from its appearance.

You can see on the picture example on the

right there, it looks like a smooth

rounded letter D or a capital letter D

when you view it on your chart. Hence the

name D-shaped. What this profile here

shows is that volume is evenly distributed

across the price range creating a smooth

bell curve like distribution basically

meaning all the distribution all the

volume is concentrated near the middle and

falls off at the lower end and falls off

at the upper end showing no interest from

either side of the market at the highs and

the lows causing all the volume to cluster

in the middle across a range. And often

with these profiles you'll find that the

point of control is right in the middle if

not close enough to the middle of the

range and this shows balanced two-sided

trading throughout a given session. And

what this represents is fair value and

equilibrium between both buyers and

sellers. And you'll see this on an actual

screenshot example in the next slide.

You'll see that on a D-shaped profile

throughout a session when price moves to

the highs of that D-shaped profile sellers

will step in and pull price back down. And

when price moves to lows or the value area

lows buyers step in and pull it back to

the middle. Neither side being able to

establish control so price returns back to

fair value where that trade can then

resume. So a D-shaped basically just

represents fair value saying this is a

fair value price this is a fair value

range and the market and both sides of the

market are comfortable trading in this

range and neither side feels the need to

seek new value at higher or lower areas.

So we call this also a balanced profile

because price is balanced. When the

profile shows a D-shaped the markets are

in harmony. It's a perfect balance. Now

here's an example of a D-shaped profile

and what price does in this condition. So

you can see we have our volume profile

developing volume profile and you can see

that the volume is all developed in this

middle cluster. See it tapers off nicely

very smooth. There's no specific high

volume nodes in this profile. It's all

just one big high volume node with a very

smooth distribution here. With a total

drop off on the upper end and total drop

off on the lower end. You're developing

value high being the upper blue line.

Developing value low being the lower blue

line. Developing point of control being

the red line. So you can see when price

moves to the highs the sellers step in

pull it back towards the middle. Price

moves down to the value lows. Buyers step

in pull it back towards the middle and

then eventually back to the upper end. And

this keeps repeating over and over again

until one side of the market is able to

take control. And you see here on this

last bit here price did manage to go a

little bit deeper. But again same thing no

sellers present below that range. They

want to return to fair value so buyers buy

that back up towards fair value. Now it's

heading back towards the value area high.

So this is what a D-shaped profile would

look like in real life in the real

markets. And how price behaves typically

in this type of environment. Now why is it

important to identify a D-shaped profile?

Well the D-shaped profile gives us

predictable behavior. So we know if we

look at that screenshot again. The value

area high of the developing session. We

know it's predictable to once price

approaches the value area high. The most

likely play is that it's going to revert

back into value. So we have a predictable

trade setup here. Fading the highs of the

D-shape. And vice versa for the lows. And

we can do that multiple times until the

breakout eventually happens. So if you're

going to fade the edges of a D-shaped

profile. Eventually you're going to lose.

Right? There will be a breakout at some

point. But it is one of those setups you

can take over and over again if you choose

to. Or if you missed an earlier trade. You

can take the next trade. It's very

predictable. And offers a lot of

opportunity. The reason being because

there's a high probability for mean

reversion. So reversion back to the mean

or back to fair value. That POC becomes

the center of gravity. As the market

struggles to find buyers above and sellers

below. As you can see again. When price

reaches value highs. As we know for a

breakout. As you've seen from this course.

When a breakout occurs. Value area highs

will properly break. And then be retested

on the other side. Finding those buyers to

continue price upwards. And vice versa.

But in a D-shaped profile. You're going to

see the opposite of that happen. Price

will approach the value highs. Struggle to

find any buyers above value highs. So

sellers can sell that back down. Taking

control back to fair value. And vice versa

with the buyers. No sellers present at the

lows. So buyers can buy that right back

up. And bring it back to fair value and

beyond. So when it comes to these types of

profiles. Avoid looking for breakouts.

Because price is more likely to return

into value. Now it doesn't mean that it's

going to just endlessly range. Eventually

you will take a loss. Eventually you will

be wrong. And price will break away. This

is bound to happen. The markets cannot

range every single day. Or it's even rare

that the markets will range like this for

multiple hours. But it's something to

identify as intraday traders. We need to

be aware of when we see a distribution

like this in the profile. That our trade

setups should revolve around mean

reversion. Trading back into value. Versus

trying to trade the breakaways. And break

away from value areas. Now a D-shaped

profile doesn't have to be an entire

profile. Of course in the example shown

previously. That was the whole developing

profile was a D-shape. But sometimes you

may have a portion of a profile that's

showing even distribution. You might find

that on the upper portion of a profile.

That this sort of shape has formed. Or

this large thick cluster of volume has

formed at the upper end or lower end of a

range. And you'll be able to identify that

via the lack of shelves. See with a

typical high volume node. They're very

distinctive edges and clusters of volume

within a profile. But with a D-shaped

profile. You're going to see just a large

cluster. Just a mound of volume with no

distinctive edges. Again if we go back to

the example. You can see there is no

distinctive high volume node in here worth

noting. They are all clustered together.

Relatively similar volume. And it's all

focused within this one price range. With

big drop off on the upper end. And big

drop off on the lower end. Effectively

creating one large high volume node. So

sometimes you'll see this form on the

upper end of a profile. Or the lower end

of a profile. And that will give you a

clue as to when you should take this

approach to the market. And identifying

them by the lack of distinctive shelves.

Now a quick note on this. We're looking

for this type of profile distribution to

form in the developing profile. Not the

previous profile. So those profiles that

have already closed. A.K.A. previous day

profile. Overnight profile. Previous

week's profile. Those have already closed.

Yes they may have formed D-shaped profiles

at the time. And closed off as D-shaped.

But just because those previous profiles

closed as a D-shape. It doesn't mean you

should continue to take that fading

approach in the next session. Unless

confirmed by the developing profile. If

the developing profile gives you a

confluence. Then yes you should take this

approach. But say for example the previous

day's volume profile was a D-shape. It

closes off. Those become your PD levels.

Going into the next day. You should watch

to see how that developing profile

develops around those areas. Before

determining if you should take the D-shape

approach to those levels. The point I want

to make here is. Only look to take D-shape

plays. If the developing profile confirms

those previous profile levels. So general

rules for trading a D-shape profile.

Number one obviously you want to fade the

extremes. The developing value high and

value low. Where that volume totally drops

off. Is where you would want to be looking

for your trade setups. You don't want to

be taking your entries near the midpoint

of the range. You don't want to be taking

your entries within the cluster of volume.

But where instead the volume drops off

into those value high and value low areas.

When it comes to setting targets. You want

to take profit at POC or before POC. Say

if you're going long from the lows. You

want to take profit as close to the POC as

possible. And vice versa if you're

shorting the highs. For the highest

probability exits. Generally you don't

want to be holding a trade from the lows

through POC back to the highs. Because

when a breakout does eventually occur.

It's most likely going to occur from the

POC. So say if price comes to the valley

area low. Trades back up to POC. When the

breakout eventually occurs. Typically it

happens from the fair value point. So if

you're trying to hold to the other side of

the range. If it's about to break out. It

hits POC. And then melts to the downside.

You've just taken a loss. Wiped out your

profits. When you could have just exited

safely at POC. Before that breakout

occurred. So in order to provide

protection for the eventual breakout.

Ensure you're taking profits at POC at the

very latest. For the most part. Unless you

have reason to believe that price will

push through POC. And break to the other

side. But for the most part. Again we want

those high probability trades. So exit at

POC. Now these D-shaped profile setups are

even more powerful. When the extreme edge

of the D-shape is paired. With one of our

previous day, week or overnight value

levels. For extra confluence. Say if you

have a D-shaped profile. And at the value

area high. You have for example. A

previous day's value area low. Previous

day value area high. Or any sort of value

level. Sitting across the upper portion of

a D-shaped profile. That is an added extra

confluence. That makes that a more certain

trade. Or a higher probability trade. It

doesn't mean you want to come in and start

fading a D-shaped profile on its own

whenever you see it. That would be a C

-ranked trade. But ideally for the best

quality trades. Pair it up with another

confluence like a previous value level.

Now we're going to have a look at an

example of a trade taken. With a D-shaped

developing profile. Only a C-ranked trade.

So no other confluences. But just to show

you what a real trade looks like when

taken using just the D-shaped profile as

confluence. And just a note on this. Stop

loss placement when it comes to D-shaped

profiles can be tricky. Because we have no

high volume nodes to place our stop

behind. We don't have any logical points

to work with when placing our stop loss.

So an approach I like to take. We will

cover that in the video coming up shortly.

But your stop loss is going to be

completely arbitrary in these cases. So

that is the one tricky thing with D-shaped

profiles. Is you're going to have to use a

stop that number one you're comfortable

with. And number two that makes sense in

terms of risk to reward. So let's have a

look at a real trade example. Trading a D

-shaped profile on a C-ranked trade.

Here's what a D-shaped profile will look

like in real life. Now notice how it's not

always going to be perfectly D-shaped. As

in a perfect rounded mound. You can notice

a D-shaped or an even distribution

profile. By what we mentioned earlier with

the lack of significant nodes across a

distribution. You can see the volume is

very concentrated across this middle

range. With a complete drop off in volume

off the edges. You can see little to no

activity at the highs and the lows. Now we

currently open up. This is a Sunday going

into beginning the trading week. We've

opened up with a massive gap up due to

Trump tariff news over the weekend. But

that aside this is still a tradable range

here. Confirmed with our even distribution

profile. Now this is a trade I took on one

of my accounts here. Fading the extreme of

the lower end of the D-shaped profile. And

scalping back up towards the center of the

profile. Which is ultimately where you

want to take profit. So insert a

screenshot of the execution here. So you

can see my entry and exit. My entry was

taken around here. At the low value area

low of the D-shaped profile. Where the

volume starts to taper off. And because a

D-shaped profile represents a balanced

trading range. And fair value. You want to

be buying back towards fair value from

below. And selling back towards fair value

from above. So given that we're at the

value area lows. I got a buy position.

Stop loss placed at an arbitrary one-to

-one. Targeting the midpoint of that D

-shaped distribution. Or the point of

control of this D-shaped distribution.

Which was two points away from my entry.

So I put my stop loss also at one-to-one.

Two points which also seemed fair. It was

to the lower end of the profile. Where

that volume completely dropped off. Right.

You can see little to no volume down here.

The low is where my stop loss was. And

it's also below a recent low here as well.

So I was happy with my stop loss where

that was. And with these types of trades.

You always want to target the midpoint for

your take profit. You don't want to try

and be greedy. And trade both sides of the

range. Because when this does eventually

break out of a range. It is going to most

likely break away from that midpoint. Come

back to fair value. And push away to never

come back. So you don't want to be caught

unlucky with that. Your highest

probability play with an even distribution

profile. Is fading back towards. And

getting out once it hits that fair value

price point. Now you can see this play

happening all throughout the day here.

Fading both extremes. That profile very

evenly distributed across the middle. So

as price pulls down to these areas here.

That's where you're going to get your long

play. As it pulls up to the upper end.

Your short play. And again there's a clean

one. Short play from here back down.

Watching the profile still noting the even

distribution. And fading both sides of

that range. So again to reinforce in terms

of take profit. You always want to be

taking profit. At point of control or near

point of control. Of an even distributed

profile. And your stop loss. Stop loss can

be a bit more tricky. Because we don't

really have much to go off. What I like to

do. Is make sure my stop is at least.

Behind a high or low of the range. And

also to make sure. That it is at the

extreme of the profile. Where that volume

completely dropped off. Because price is

unlikely to go towards that area. Or trade

towards that area. If price is to remain.

In a fair balanced distribution range. So

it can be a little bit harder to place

your stop. But I like to go for at least

one to one. As long as that stop loss is.

Where that volume tapers off. So that

should equip you to be able to identify.

These D-shaped profiles. And understand

how to approach them. And how to trade

them. And the cautions you need to take.

The precautions you need to take. We will

try to accumulate as many D-shaped

examples. To add to the playbook as well.

To help you see the different approaches.

That can be taken with D-shaped profiles.

And remember this module. Is just helping

you to identify this. And understand how

to trade these profiles. It's not saying

this is something. That you have to trade

in your strategy. If you do struggle with

trading D-shaped profiles. Because they

can be tricky. Due to the stop loss

placement. And the eventual breakout. If

you do struggle with these profile shapes.

You can just avoid them altogether. But

for those of you who do want to attempt.

To trade a D-shaped profile. I personally

have no problem trading D-shaped profiles.

I enjoy range trading. And it works well

for me and my edge. But if it's not

something you're able to crack. Don't feel

like it has to be something. You have to

add to your strategy. It is simply another

tool to add to your volume profile trading

toolbox. So I hope you found this module

helpful. And I hope that it has equipped

you. To better understand this special

volume profile shape.