With much props to Soultrader (Market Profile trader):
Here is a shot from yesterday. We look left to trade right. The 15 min trend/profile chart sets the stage for the 5 min trade chart.
Things get started when price shoots out of the
Value Area (t) (Deviation Range) and finds support 1 pip above the 1.48
00 psych level. We get a wide spread bar on high volume closing off its lows with the next bar up. This looks like a bottom reversal.
Jump over to the 5 min. We see the same pattern forming here. The aggressive trader might jump in here. I am a bit more conservative and need to see certain things.
Back to the Profile chart. One candle later we have 3 candles closing outside of the
Value Area. Now we have enough to truly consider price to have traded outside of Value. Note that other Bottom reversal just to the left. Since price did not close out side of Value on more than just the dark candle, we are not looking at a 80% rule trade here. Some may note a total of 5
Value Area exits with re-entries (Although I would not consider them all trade set ups) with 4 of the 5 hitting the opposite side of the
value area. Is 4/5>=80% ? You do the math.
Anyway back to the bottom reversal of note. Let's jump over to the 5 min. Notice that we get a WRB about 5 candles after the reversal. This sets up a WRB support/resistance zone. Now we know that WRB signal possible changes in the supply/demand dynamics in the market. Which is why I like to take signals within the body of a WRB. Things don't always come out perfectly, or do They? Two Candles later, a nice Test forms. This not a regular Test, it is a Test in a Rising Market. An even more powerful type of Test. There is strength in the background to back up the bullishness of this candle. But wait, there's more
.
The very next candle that confirms the Test ends at the same time we get the first candle on the 15 back within the
Value Area (t). In other words, an 80% rule trade sets up as we get a Test in a rising market that is just slightly out of the body of a WRB with both periods showing a bottom reversal.
While it is not a stretch, There is a Long Shadow that the Test bar is completely within. But leaving that aside, the point is with a little less rigidity AND confirmation from an unrelated element, the trade remains valid.