Value Area

Can somebody please explain what "Value Area" is and how to trade this area.

Cheers'
Rockey

Hi day trader

Is this how you use the VA?

If the market opens and stays above the Higher value area, this is a strong bullish signal and only look for long set ups. However if the market trades under the Higher value area or maybe a close below it on a 10 min chart..If this happens you would go short with a target in mind of the lower VA area.

Cheers
Bill

In general Market Profile theory that's about half right.

Above the VAH you're looing for longs with support at VAH line. Below VAL you're looking at shorts with VAL as the resistance line. In the value area you're looking at trading against both the lines with the anticipation of a Z-day.

Thanks for that day trader

Another two question if you don't mind, What if the market opens in side the VA...Would you then look for support at the high and lower VA.....Further if it can hold one of these VA points and breaks one of them, you would go with the flow of the market....

Also there is another method that one can trade. Do you use this?

The 80% Rule: when the market gets (or opens) above or below the VA, then gets in the Value Area for half hour based on a 30 min bar. The market then has an 80% chance of filling the VA.

Thanks

Bill

Here's a good summary of the 80% Rule which should answer your question.

If the market opens inside the Value Area then you look at the VAH as a resistance level and the VAL as a support level. The general theory for any penetrated support/resistance level is that it becomes a resistance/support level subsequently - i.e. that doesn't just apply to MP but all S/R levels.

quote:

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Originally posted by day trading

Here's a good summary of the 80% Rule which should answer your question.

If the market opens inside the Value Area then you look at the VAH as a resistance level and the VAL as a support level. The general theory for any penetrated support/resistance level is that it becomes a resistance/support level subsequently - i.e. that doesn't just apply to MP but all S/R levels.

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Thanks . There is not much on the web about it. I wonder if the pros want to keep it quite not for everyone to use the VA.....Anyway, I appreciate your link and explanation on the VA

Bill

I know the guy who ran the back test and discovered that the 80% rule is more like the 60% rule when applied to the E-mini S&P500 and I trust the stuff that he does because he's a clever guy.

There's a lot more to Market Profile than just what you read in the books. I have found that you need to do a first sweep through all the material, watch it in action and digest it. Then think over the theories and why they work (or don't) and other applications.

I'm currently looking at combining volume with the classic time based Market Profile in a different way to how volume profiles are constructed.

You also have the art of the discrete rolling profile. I call it an art because it is up to the trader's discretion when to cut off one profile and start another. So the rolling profile is not limited by the span of a day but by the action in the market. Dalton and Steidlmayer both talk about this in their books and there's no rule to follow here.

Few! you to clever for me day trader. I think I will just stick with the basic VA for the time being lol....I also read last night, what you say is right about the 80% rule.

Can I ask where do you get your VA number from?

Thanks

I use a calculator that does it for me. Very similar to the one that runs here: TPO Generator

day trader

Are you VA based on volume, becuse I heard some dont use Volume.

Thanks
Bill

These VA's are based purely on price. There is no volume used in these calculations. These are classic/true/pure Market Profile VA's. What you are talking about are Volume Profiles.

The Market Profile TPO structure was created to proxy volume back in the days when volume data was difficult to come by and difficult to chart in this manner. Theoretically a volume profile should be superior but if more traders are using a Market Profile then that could swing the balance.