80% Rule and Day Trading Market Profile?

Ive seen allot of info online about the 80%. My question how does one day trade Market Profile (MP) when the Value Area (VA) is constantly moving? I trade futures and currencies on 2hr charts. So the market will open at, say, 7PM. Ill watch the VA develop till 11pm, ill take a screen shot of the current VA before i go to bed. Then when i check my chart at 8am the next morning the VA is at completely different levels. Had i placed a trade at the lower VA before i went to bed i doubt price would have reached the upper VA. Im just wondering how one trades MP using the 80% rule when the VA is so unpredictable throughout a trading day.

Thanks.

The 80 % rule is just not true so I wouldn't waste my time there...it is meant to be traded using the previous days Value area and not the developing value area from the current day

a few basic rules that traders follow regarding Market profile....

1) If we open at 9:30 E.S.T inside the previous days value area then we are looking to sell at the previous days Value area high or buy at the Va low

2) If we open outside of value then on a gap up we would try to buy at the previous days VA high

3) If we open outside of Value on a gap lower then we try to sell at the previous days VA low..

These are very basic ideas and you really have to study your market and know what is happening with Volume above or below your 60 minute range.

In the ES I try to put trades on outside of what is thought of as Value with the idea that we will have mean reversion back to value..We have a lot of back and filling in the ES

Hope some of that helps

Originally posted by bigdoglee007

Ive seen allot of info online about the 80%. My question how does one day trade Market Profile (MP) when the Value Area (VA) is constantly moving? I trade futures and currencies on 2hr charts. So the market will open at, say, 7PM. Ill watch the VA develop till 11pm, ill take a screen shot of the current VA before i go to bed. Then when i check my chart at 8am the next morning the VA is at completely different levels. Had i placed a trade at the lower VA before i went to bed i doubt price would have reached the upper VA. Im just wondering how one trades MP using the 80% rule when the VA is so unpredictable throughout a trading day.

Thanks.

Thanks Bruce that helped allot. I figured the 80% rule was a bit of smoke and mirrors.

So when you say you put trades outside of value on the ES looking for regression to the mean, you are referring to the previous days definition of value, correct?

yes...that is the basic concept but you should look over the last two days of the ES daytrading threads where I was babbling about high volume areas and stuff....I think in the long run understanding volume will be very helpful.


As a day unfolds I will often sell above the current perception of Volume/value or try to buy below the current perception of value....I'm planning on updating my Volume as attractors thread this weekend so that be of help..I just need to find the thread.

I'm not sure how your specific market trades...some trend more than others so that is why it is important to really understand the characteristics of the market you trade

When I primarily traded the ES I used to watch closely for 80% rule opportunities, trade with them, and track how close to 80% they actually performed.

The "rule" was based on the MP value area of the ES from the prior day's pit session ... what Day Trading posts on this site. The rule is triggered if the ES opens or journeys outside of the value area during the pit session and then goes back into the value area and stays in there for two consecutive TPOs (30 minute periods with any time in that period satisfying the trigger - it doesn't have to close the period in the value area). If it does that there is allegedly an 80% chance that it will journey to the opposite end of the value range by the end of the session.

Over a period of about 18 months I tracked each triggered 80% rule and found that it actually did as it was promoted to do about 70% of the time.

That said, I found that it was not really helpful for me in terms of entering and staying in a profitable ES position. FWIW, I found that it was better to monitor tools such as those described by Kool Blue and Bruce.

I now trade primarily energy futures and have found that Market Profile value range tools have been little help - perhaps because compared to the ES so much more of the market activity (especially for crude oil) happens outside of the NYMEX pit session.