Trading Tip #13: How to Pick Intraday Market Direction the 80% Rule

Posted in the Day Trading Forum

Larry Levin

Ho Chi Minh City, Vietnam

#1 Dec 5, 2011
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.

See image at: http://www.tradingadvantage.com/lp/tradingtip...

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
Founder & President- Trading Advantage
http://www.tradingadvantage.com

Tell me when this thread is updated:

Subscribe Now Add to my Tracker

Add your comments below

Characters left: 4000

Please note by submitting this form you acknowledge that you have read the Terms of Service and the comment you are posting is in compliance with such terms. Be polite. Inappropriate posts may be removed by the moderator. Send us your feedback.

Day Trading Discussions

Title Updated Last By Comments
Binary Options 60 Seconds Trade (Nov '13) Dec 14 Jerry 3
CBRtrade provides Leading Day Trading services.. Nov '14 jummon 1
What is your favorite NinjaTrader indicator site? (Oct '09) Nov '14 Jimmy 34
Analyst Update: J C Penney Company Inc, Plug Po... Nov '14 Krypt Keeper 1
UGG boots Clearance Sale (Oct '09) Oct '14 kurtcooksalot16 33
Most Active Options Update: eBay Inc Sep '14 Philip Cohen 1
Analyst Downgrades: eBay Inc, GT Advanced Techn... Sep '14 Philip Cohen 1
More from around the web