Composite Volume Profile Trade

Entry Logic

• Entry is a long position when the price pulls back to a high-volume node (HVN) on the composite volume profile.
• Confirmation is a bullish pin bar or engulfing candle on the 4-hour chart.
• Timeframe is the 4-hour chart.
• Location is at the HVN of a multi-day composite profile.
• Market is in a long-term uptrend.

Exit Logic

• Profit target is the next HVN on the composite profile.
• Do not scale out.
• Trail the stop loss below the low of the entry candle.
• Exit if the price closes below the HVN.
• Exit on a bearish reversal pattern.
• Exit if the price does not move up within 5 bars.
• Exit if buying momentum stalls.

Stop Loss Structure

• Hard stop is placed below the low of the entry candle.
• Soft stop is a close below the HVN.
• Maximum dollar loss is $1000 per trade.
• Maximum percent loss is 5% of the account.
• Structural stop is below the HVN.

Risk Management Framework

• Risk 3% of the account per trade.
• Daily loss limit is 9% of the account.
• Weekly loss limit is 18% of the account.
• Maximum drawdown is 35%.
• Risk-reward ratio must be at least 1:1.5.

Position Sizing Model

• Use a fixed fractional position sizing model.
• No volatility adjustment.
• Full size for all setups.
• Do not scale in or out.

Trade Filtering

• Avoid trading in long-term downtrends.
• Only trade when there is a clear HVN on the composite profile.
• Trade only major stock indices and currencies.
• Avoid trading during major news events.
• Do not trade in choppy markets.

Context Framework

• Trend is up on the daily and weekly charts.
• Price is above the 200-day moving average.
• Price is consolidating near an HVN.
• Location is at the HVN of a composite profile.
• The higher timeframe chart (weekly) shows a clear uptrend.

Trade Management Rules

• Move stop to breakeven when the price reaches a 1:1 risk-reward ratio.
• Do not scale out.
• Do not add to the position.
• Let the trade run if buying momentum is strong.

Time Rules

• This is a swing trading strategy, so time of day is not critical.
• Avoid holding positions over major holidays.
• The strategy works best in trending markets.

Setup Classification

• A+ setup: Pullback to a major HVN on the composite profile in a strong uptrend.
• A setup: Pullback to a minor HVN in a moderate uptrend.
• B setup: Pullback with low volume.
• C setup: No clear HVN.

Market Selection Criteria

• Trade SPY, QQQ, EUR/USD, and GBP/USD.
• High liquidity is required.
• Moderate volatility is preferred.

Statistical Edge Metrics

• Expected win rate is 60%.
• Average win is 3R.
• Average loss is 1R.
• Profit factor is 1.8.
• Expectancy per trade is 0.8R.

Failure Conditions

• The strategy fails if the HVN does not hold as support.
• Avoid trading when there is a strong bearish sentiment in the overall market.

Psychological Rules

• Be patient and wait for the price to test the HVN.
• Trust the HVN as a long-term support level.

Advanced Components

• Use a composite volume profile to identify the HVN.
• Use a trend filter to confirm the long-term uptrend.
• Do not trade correlated instruments in the same direction.
• The weekly chart must confirm the uptrend.

Location

• Strongest in a clear long-term uptrend.
• Weakest in a downtrend or a range-bound market.
• The location of the HVN within the long-term trend is important.