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- The 80% Rule
Market Profile's 80% Rule
The Rule
If, after trading outside the Value Area, we then trade backinto the Value Area (VA) and the market closes inside the VA in oneof the 30 minute brackets then there is an 80% chance that themarket will trade back to the other side of the VA.
Using
1. Wait for the trade to close inside the VA.
2. Try and get best possible trade entry. If possible, enterfrom VA level that was crossed in order to close inside VA.
3. Target most of the position at the other side of the VA.
Notes
One trader noted to me that in testing the 80% rule usingTradeStation the probability is actually 62% and not 80%. The tradesupposedly gets its name from the probability of the outcome of thetrade. i.e. There is an 80% probability that the market will tradeto the other side of the VA.
Look at your risk/reward when taking this trade. If the VA isonly 2 points wide and you use a 3 point stop then this trade isprobably not worth taking when the VA is this small.
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