[tradingadvantagetm]

Let me introduce you to one simple technique I've used to pick intraday market direction with 80% accuracy.

Would you like to know if a particular trade has an 80% probability of working? Would you like to know exactly where to enter that trade, and where to exit? Would you like to trade this technique with a 2 point stop loss or less?

It Doesn't Matter if the Market is Going Up or Down, This Simple-to-Learn Method Has a Historical Accuracy of 80 Percent!

Using just two key numbers each day, floor traders and other professionals can try to pick the direction, entry price, stop loss and target price of a particular trade. It doesn't matter if the market is going up or down - this simple to learn method has a historical accuracy of 80%. In fact it's called the 80% Rule.

Each morning you will know what those two key numbers are. Then, if the set up is correct, simply enter the trade, set your stops, set your target price and sit back with a trade that has an 80% expectancy of hitting the target. What could be easier?

Here are the basics for the 80% Rule:

The Value Area (Secret Tip #12): The range of prices where 70% of yesterday's volume took place. For instance, if the value area in the S&Ps is 115800-117200, then 70% of the previous day's volume took place between the prices of 115800-117200.
The 80% Rule: When the market opens above or below the value area, and then gets in the value area for two consecutive half-hour periods. The market then has an 80% chance of filling the value area.



The value area and the 80% rule can be excellent tools for judging potential market direction. Many traders familiar with the value area and the techniques that go along with it use it to help them decide what trades to do each day.

A couple of key points to remember:

If the market opens above the value area, try to enter a short position as close as possible to the top of the value area.
Conversely, if the market opens below the value area, aim to enter any long position as close as possible to the bottom of the value area.

Once you get used to it, you will find that using the value area each day will be valuable in your trading. (Pun intended!)

The 80% rule is a simple way to ride the market as it potentially fills the value area. However, there is an exception to be alert for. If the market opens inside the value area and then migrates above or below it, the 80% rule can still come into play. Watch for it to get back into the value area for those important two consecutive brackets or 30-minute bars.

Best Trades to you,

Larry Levin

[SpearPointTrader]

That is a very interesting tip. Obviously it is for sideways markets, because a strongly trending market will not cover the same ground twice.

I am going to have to play with this, and see how it works.

Right now, I Spear Point trade, which allows me to win 70-80% of the time (Sometimes more if I am focused) on trends. I generally just trade for the day, and am often in, and then out quick.

[JohnTaylorHK]

Hi Larry, thanks for the great insight!

My studies have shown that volume is more fractured than I first thought, in that 70% of the volume may be concentrated in several disparate areas. In this case (I attach the current EURUSD 1 day volume heat-map), how would the rule apply. FYI, I use this to show points of support and resistance, and don't usually display the colors, just the lines at which volume changes by a significant percentage.

Further to your post, what action do you recommend if price is within the zone, since there is no directional information at this point (is we treat the zone as an attractor then the play is obvious).

Best

John

[JohnTaylorHK]

Originally Posted by JohnTaylorHK »

Hi Larry, thanks for the great insight!

My studies have shown that volume is more fractured than I first thought, in that 70% of the volume may be concentrated in several disparate areas. In this case (I attach the current EURUSD 1 day volume heat-map), how would the rule apply. FYI, I use this to show points of support and resistance, and don't usually display the colors, just the lines at which volume changes by a significant percentage.

Further to your post, what action do you recommend if price is within the zone, since there is no directional information at this point (is we treat the zone as an attractor then the play is obvious).

Best

John

Hmpft! Will try again with the attachment, problem with the "upload button" not being on the screen

[joshdance]

John, attached is an accurate heat map profile of the euro futures contract. As no volume is available for forex, this is about as accurate a volume picture as you can get for fx. As you can see, your heat map profile is quite a bit inaccurate. The volume is much more heavily concentrated towards the bottom of the profile, which should make sense, as there was very little volume until 8am EST, and then the heaviest period was 9am to 10am. Then it spent some time in the lower range developing value.

Also, I'm curious -- you seem to have a daily profile set up from midnight to midnight. Why? A much more logical option is to use 6pm EST as the start of your 24 hour trading day. No market trades from midnight to midnight EST.

[TheDude]

Firstly, when the first 'bar' comes around, there may be little edge left in this trade.
Secondly, context is paramount. Suggesting that it works regardless of direction is deeply misleading - as is your reference to floor traders, as they are now extinct - those who are left are only really there to execute blocks. The comment however does suggest how old the original material was (this was originally a set-up from Cisco futures if Im not mistaken).

You also suggest a fixed stop of 2 points. This too is silly.

The original 80% idea suggested that price will reach the other side of value 80% of the time. You will only get that figure if you apply the rule with common sense and not trade the set up mechanically as you suggest. In other words, it is quite possible the market could make another daily high/low (thus taking the 2 point stop out) before rotating to the other value extreme.

People should be very, very cautious of vendors.

[DionysusToast]

"Secret Tip #12"

[dangermouseb]

How do you calculate the value area? top 80%, bottom 80%, 40% either side of the median?