The Value Areais defined as where 70% of the previous days volume took place. Basically the Heartof the previous days activity. We calculate the value areadaily for the CBOT ^® mini-sized Dow ^SM .

How to use the Value Area& the 80% Rulein CBOT mini-sized DOW futures trading to identify intra-day entry and exit signals.

We use 30' (30 minute) bars to qualify our potential trade opportunities.

For example, if the market opens (or gets outside of the value area) and then gets back into the value areafor (2) consecutive 30' bars the 80% Rulestates it has a high probability(depending on market conditions as much as 80%) of completely filing the value area. The rule can be misleading, in that you DON'T have to see both 30' bars close within the value area. The first bar can enter and close within the value areaand when the second bar opens withinthe value areawe have met the 80% Rule criteria (see the example below).

We don't blindly follow the above. The trader who enters a value area tradewithout evaluating other market conditions has little better than a 50% chance of seeing the value areafilled. The power of the using the 80% Rulelies in the further evaluation of the current market variables such as value areasize, price extension and market internals.

In the illustration of the 30' bar chart of the CBOT mini-sized DOW (YM) above, you can see the market opened insidethe value area, and got out of the denoted purple value areain the afternoon. The 10th red bar of the session got back into the purple value area, which was our first alert to watch for the next bar opening or stayinginside the value area. When it did, the 80% Rule, by definition, was triggered which was the useful information astute traders look for, and the market continued straight down completely filling the value area.

I went back to your former post and I'm still not sure. I have not heard of this before. Thanks

foolwise,

I find your approach very interesting. Like an auction letting price come to you.

Lp