Market Profile & Auction TheoryAdvanced

The 80% Rule (Value Area)

The Market Profile 80% rule: when price opens outside yesterday’s value area and then spends two periods back inside it, traders expect it to cross to the other side. Rules and honest limits.

Library categories

What it means

The 80% rule says: if the market opens outside the previous day’s value area and then trades back inside it for two consecutive 30-minute periods, it has a high chance of travelling to the opposite edge of that value area.

The "80%" comes from early Market Profile teaching; it is a name, not a measured probability you should rely on.

Why traders use it

An open outside value tests whether new prices are accepted. Returning and staying inside value shows they were rejected, so the market rotates through the old value area.

Chart examples

Open below value, back inside, cross to the other side

Two periods insideRe-entryOpposite edgeYesterday’s value area
Price opens below yesterday’s value area, re-enters it, holds inside for two periods and travels to the opposite edge.Schematic diagrams drawn to explain the idea; they are not market data.

How to identify it objectively

  • 1Mark yesterday’s VAH and VAL.
  • 2Today opens outside that range.
  • 3Price re-enters value and two consecutive periods close inside.
  • 4The opposite value edge is the target.

Bullish use

  • 1Open below yesterday’s VAL.
  • 2Two periods close back above VAL.
  • 3Target: yesterday’s VAH.

Bearish use

  • 1Open above yesterday’s VAH.
  • 2Two periods close back below VAH.
  • 3Target: yesterday’s VAL.

What confirms it

  • Both periods close inside value.
  • POC is crossed on the way.

What invalidates it

  • Price falls back out of value on the entry side.
  • Only one period holds inside.

How a hypothetical setup is built

Entry

After the second period closes inside value.

Stop

Back outside value on the entry side.

Target

The opposite edge of yesterday’s value area.

A hypothetical illustration of how the concept is turned into a plan, not a recommendation. Practise it on a paper account first.

Historical testing

Not tested on The Tradeskill. Treat the name as a label; measure the hit rate on your own market before trusting it.

Limitations: when it fails

  • The 80% figure is not a verified statistic.
  • Period length and session times change results.
  • Strong news days ignore old value.

Knowledge check

Pick an answer to see the explanation. Nothing is saved.

The 80% rule starts with an open…

1. The 80% rule starts with an open…

How long must price stay back inside value?

2. How long must price stay back inside value?

Is "80%" a guaranteed probability?

3. Is "80%" a guaranteed probability?

Practise it risk-free

Open the free chart, use replay to go back in time and look for this concept candle by candle with $20,000 in virtual money.