Market profile value area

Why it works

The value area is where buyers and sellers agreed on a fair price. An open outside it is a test of a new price. If the market rejects the new price and returns inside, it tends to explore the whole old value area again.

The so-called 80% rule is a traders' rule of thumb, not a guaranteed statistic, but the logic of acceptance and rejection is sound.

The rules

Setup

• Mark yesterday's value area high (VAH), value area low (VAL) and point of control (POC).
• Today opens outside the value area.

Entry

• If price returns inside and holds for two consecutive 30-minute periods, trade toward the opposite edge.

Stop loss

• Beyond the value area edge where price re-entered.

Exit and management

• First target the POC, final target the opposite edge.

Filters that improve it

• Best on markets with real volume data: index futures and large stocks.

Worked example

Illustrative US 500 example: yesterday's value area is 5,480–5,520, POC 5,500. Today opens at 5,470 and after an hour holds back above 5,480. Buy at 5,485, stop 5,472, targets 5,500 and 5,520.

Illustrative numbers, not a recommendation.

Common mistakes

• Entering on the first touch of the value area without acceptance.
• Using value areas from data without real volume.

How to practise it

In Candlemind draw the fixed range volume profile over the previous session to find its busiest zone, then follow the acceptance rule on 30-minute candles.

Pre-trade checklist

1. VAH, VAL and POC marked
2. Open outside the value area
3. Two 30-min periods inside
4. Stop beyond the re-entry edge
5. Targets: POC, then opposite edge

Frequently asked questions