Hey everyone,
If there’s one question I get asked more than any other, it’s some version of this: “How do you know where the price is going to go?”
The honest answer? I don’t. And neither does anyone else.
As professional traders, we aren’t in the business of prediction; we’re in the business of probability. Our job is to identify market conditions where the odds are stacked in our favor, understand our risk, and execute with discipline. We are probability managers. When we find a setup with a high statistical likelihood of success, we have an edge.
Today, I want to pull back the curtain on one of the most reliable, high-probability setups I look for on a daily basis: The 80% Value Area Rule.
The Foundation: What is the "Value Area"?
Before we dive into the rule itself, we need to understand its foundation, which comes from a methodology called Market Profile.
At its core, Market Profile helps us understand the market as a two-way auction process. The most important concept it gives us is the Value Area (VA). In simple terms, the Value Area is the price range from the previous day where the majority of business was done—typically around 70% of the total volume.
Think of it as the market’s “comfort zone.” It’s the range of prices that buyers and sellers deemed fair and where they were most willing to transact. Prices outside this area are, by definition, considered less fair or “unfair” by the previous day’s participants. This distinction between “fair” and “unfair” prices is the key to everything.
The Setup: The 80% Rule Explained
The rule itself, as described in the image you may have seen, is elegant in its simplicity. I have verified this pattern across years of data, and its logic is rooted in sound auction market theory.
Here are the conditions for the setup:
Open Outside of Value: The market must open outside of the previous day’s Value Area. If it opens above the Value Area High (VAH), we watch for a bearish setup. If it opens below the Value Area Low (VAL), we watch for a bullish setup.
Failed Auction & Re-Entry: After opening outside, the market fails to find new business and reverses to re-enter the prior day’s Value Area.
Confirmation of Acceptance: This is the trigger. We need to see price “accepted” back inside the Value Area. The classic confirmation signal for this is seeing at least two consecutive 30-minute periods (or TPO prints) close back inside the VA. This signals that the move outside was rejected and the market now views the prior day’s value as the “fair” place to trade again.
Once these three conditions are met, the 80% Rule is active. It states there is now an ~80% probability that the market will trade all the way across the Value Area to the other side.
If the market opened below, re-entered the VA, and was accepted, the target is the Value Area High (VAH).
If the market opened above, re-entered the VA, and was accepted, the target is the Value Area Low (VAL).
How I Personally Trade This Setup
This isn’t just a textbook theory for me; it’s an actionable trade I actively hunt. When I see the potential for an 80% Rule trade, it gets my full attention.
My process is proactive, not reactive. I identify the prior day’s VAH and VAL during my pre-market prep.
The Trigger: I am patiently watching for the open outside of value. Once price moves back inside, my alert is on. I use the 15-minute chart to monitor the potential trigger, but my confirmation is based on higher timeframes as per my trading rules—I want to see sustained acceptance back inside the VA, not just a quick pop. The two 30-minute closes is a classic signal, but building a position after the first 30-minute close is also part of my plan.
The Entry: Once I have confirmation, I look to enter the trade. My entry will be a resting order placed just inside the value area (near the VAL for a long, or VAH for a short) at some sort of significant support or resistance. My goal is to get in on a small pullback after the acceptance is clear.
The Stop-Loss: My stop is always placed just outside the Value Area. If the market reverses again and moves back out of the VA, the premise of the trade is invalidated. This gives me a clearly defined and manageable risk.
The Target: My primary target is the other side of the Value Area. With an 80% probability on my side, this is a trade where I have the confidence to let it work, aiming for a large reward relative to my initial risk.
This setup is powerful because it provides everything a professional trader needs: a statistical edge, a clear entry trigger, a defined risk (stop-loss), and a logical target. It’s the definition of a high-probability trade.
