The 80% rule

What it is

The 80% rule is a Market Profile setup. If the market opens outside the previous session's value area, then trades back inside it and stays there for two consecutive 30-minute periods, it is said to have about an 80% chance of travelling all the way to the other side of that value area.

The figure is passed around a lot but no published study backs it; even sources that teach it call it a scenario rather than a measured probability. It's a good candidate for testing in the backtester before you trust it.

How to spot it

• Mark yesterday's VAH and VAL.
• Today opens above the VAH or below the VAL.
• Price comes back inside and two 30-minute periods trade inside the value area.

How to use it

• Enter in the direction of the far side of the value area, with the stop back outside the value edge you came in through.
• Target the opposite value area edge.

Common mistakes

• Entering on the first touch back inside, before the two periods have confirmed it.
• Treating 80% as a real hit rate.

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