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Disclamer
 

In commodity future online trading the Value Area is one of the best commodity trading systems used by commodity traders, even in commodity forex online trading

In commodity future online trading the Value Area (range of prices where 70% of yesterday’s volume took place) is one of the best commodity trading systems used by commodity traders, they also use it in commodity forex online trading like the Euro/Dollar.

Now remember while you are commodity future online trading that if, for example, the value area when emini trading the E-mini S&P 500 is 1100-1115, then 70% of the previous day’s volume took place between those prices.

Let's talk about the 80% rule that many traders use when commodity future online trading.

The 80% Rule in commodity future online trading:

The 80% rule, when commodity future online trading, indicates that when the Market opens above or below the previous day's value area and then gets into it and stays in yesterday's value area for two consecutive half-hour periods (keep on reading and I will clear this out in a moment) We have a probability of 80% that the Market is going to fill yesterday's value area (moving to the opposite side of the value area).

So one of the best commodity trading systems for commodity future online trading is to try to ride the market as it fills the value area.

Two Consecutive half-hour periods:

commodities-trading

When looking at a 30-minute candlestick chart in your commodities charts, look for the following...

If the market is in yesterday's value area for one 30-minute candlestick (it Must close inside the value area) and it is still in the value area when the next candle opens, the Market has then been in the value area for two consecutive half-hour periods.

This, my friend, is the time to watch for the 80% rule (see examples below).

Ok, with that already clear (I hope), we have two scenarios to take into account, in commodity future online trading, when applying the 80% rule:

  • If the Market opens above yesterday's value area and then gets in the value area for two consecutive 30-minutes periods, there is an 80% chance of the market filling the value area.
  • If the market opens below yesterday's value area and then gets in the value area for two consecutive 30-minutes periods, there is an 80% chance of the market filling the value area.
  • Now, Let's check in commodities charts (click to enlarge) some trades we would do using this rule in commodity future online trading. These commodities charts are the cash session of Crude Oil (CL) in 30-minute candlestick charts.

  • Buying:

    commodity-future-online-trading

    while commodity future online trading the above crude oil chart, you can see how in number 1 the Market closed inside the previous day's value area for the first 30-minute period after opening below it, then in number 2, it stays there for the second 30-minute period giving the signal to go long. In number 3 (fourth 30-minutes period) the Market fills yesterday's value area to the opposite side.

    commodity-trading-system

    In this second Long example, which is a little bit more complicated, we can see in number 1, while we are commodity futures online trading, that the Market does NOT close the first 30-minute period inside yesterday's value area after opening below it, but in the second DOES.

    Now, in number 2, is that we start to count the number of periods. This second 30-minutes period is the first that the Market closes inside yesterday's value area.

    In number 3 the risk to enter long is high since the Market is almost on the top of the previous day's value area. Normally when this happens, it is wise to wait for a pullback down to the bottom of the value area and enter long there, like it happened in number 4. In number 5 the Market reaches the top of yesterday's value area.

  • Now let's look at a selling example in commodity future online trading.


  • Selling:

    commodity-forex-online-trading

    In this short example we have that: In number 1 the Market opens above yesterday's value area, so we will be looking to short yesterday's value area. The Market spends four 30-minutes periods outside of yesterday's value area.

    In number 2 the Market gets into yesterday's value area after opening above it. Now, in this fifth period, is that we start to count the number of periods. We are looking for one close inside yesterday's value area and an open of a second period inside of it. This fifth 30-minutes period is the first that the Market closes inside yesterday's value area.

    In number 3 the risk to enter short is high since the Market is almost at the bottom of the value area. You can enter short here with a tight stop above the value area high or top, but is high risk. Normally the Market "re-test" the tops and bottoms (highs and lows) of previous day's value areas before heading towards the opposite side.

    So my dear friend, since trading is based on probabilities and not certainty, try please to have a little patience and wait for a pullback to the top of the value area if you are shorting, just like it happened in number 4.

    This way, you get a low risk trade from resistance (top of the value area) to support (bottom of the value area), which in this case is number 5 where the Market fills the value area.


  • Well my dear friend this might sound like a simple commodity trading system for all the commodity trading systems out there for commodity future online trading, BUT, simplicity is king. We want to make money, not trade sophisticated systems, don't you think so?...


    Click when you are finished with The 80% rule in commodity future online trading and go back to Market Profile as a commodity trading system

    Click here to go back to Futures Trading How To


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