80% Rule

If the market opens (or gets outside of the value area ) and then gets back into the value area for (2) CONSECUTIVE 30 min bars the 80% rule states it has a high probability of completely filling the value area. The rule can be misleading, in that you DON’T have to see both 30 min bars CLOSE within value. The first bar can enter and close within the value area and the second bar OPENS within the value area we have met the rule criteria.

Don’t blindly follow the above. There are guidelines that increase the chance of approaching the 80% probability. The trader who enters a value area trade without evaluating other market conditions has a better than 50% chance of seeing the value area filled but, the power of using the 80% rule lies in the evaluation of current market variables.

Note: The top of the value area generally provides intraday support while the bottom of the value area intraday resistance.

Testing by a member of the room indicates that this happens more like 60% of the time and not 80%.

When using the 80% rule with the value area. Does the market have to open
in the va trade out and back in?

Thanks
Ben

I am not sure if the rule is valid anymore (the more public an aberration gets, the less it is an aberration) but the way I understood it is that if the mkt opens above or below the value area and then migrates into the value area it should traverse to the other border.

Bruce: Thanks for your answer.

Ben