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How to Pick Intraday Market Direction

Trader Larry Levin, President of Trading Advantage LLC, has agreed to share one of his favorite trading tips as a special treat to our viewers. Determining the direction of the market can be tricky, and just plain confusing at times. Get Larry’s expert opinion on how to keep it simple. If you like this article, you won’t want to miss his secret one-time framing technique!
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How to Pick Intraday Market Direction – the 80% Rule

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 138500-139000, then 70% of the previous day's volume took place between the prices of 138500-139000.

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.

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 it the market opens above the value area and then goes 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.

Did you like this trading tip? Click HERE for a technique Larry used to make over 1.9 million dollars in the market.

Best Trades to you,

Larry Levin
Founder & President- Trading Advantage

Disclaimer: Trading in futures and options involves a substantial degree of a risk of loss and is not suitable for all investors. Past performance is not necessarily indicative of future results.

Comments

  1. Nicholas Abraham says:

    If todays high is higher than previous day's high then BUY towards the end of the
    Market If it is less than previous day's high then SELL towards the end of the Market

  2. Jill says:

    Dana Lee-

    Math for tomorrows 70% trade:

    Look up your stock or whatever you are thinking of trading, then
    Take the today's closing high(H) and today's closing low(L),
    subtract them to find the difference(D).
    H - L = D
    multiply the difference(D) by 0.15 and 0.85,
    D x 0.15 = Y (Y= the high number of the 70% range)
    D x 0.85 = O (O= " low " " " 70% range)

    Plot Y and O and U are DONE.

    Thank you with gratitude Larry for sharing your valuable knowledge!

  3. Billy says:

    check this out:

    http://www.mypivots.com/board/topic/6577/-1/value-areas-and-point-of-control-2011-q2

    and this

    "I usually use stockcharts.com. One of the studies they offer is called “Volume By Price.” If you dial the chart into the time period you want to use and activate that study, you should see a market profile chart overlaid on your candlestick chart.

    Here’s an example http://stockcharts.com/h-sc/ui?s=$SPX&p=D&yr=1&mn=0&dy=0&id=p14282454335

    I then try to identify where 68% of the volume lies and find a round number corresponding to the high and low of value area"

  4. Billy says:

    Has anyone been able to find current Value Area data on Larry Levin's site? I even subscribed to the newsletter and the only data I found was from 11/24. Thanks for your help!

  5. DG says:

    Mike,

    Agree with some of what you say, but how can you have pre-set stops when everyone's risk tolerance and trading time frames are different?

    A day-trader and a long-term trader will have vastly different risk parameters, with a day trader trading fractions of the daily range and the long-term trader trading multiples of the daily range.

    Also, the stop parameters for each trader can be very different, with some using % of capital and others using "stop under structure" or something like it.

    I suppose Marketclub could include various stop loss options for different risk profiles and techniques, but I can see some traders getting confused and having significant draw downs if they use a long-term stop but are short-term traders.

    Cheers

  6. mike says:

    Bunch baloney as is most posts here. Are you confused enough ?? Stochastics--%r--etc. all b/s indicators. Sure they work sometime, but lagging at best. Trade price and forget all the rest.
    Now, in markets clubs defense, the weekly/monthly indicators are good, bordering on very good. What would make them better would be
    1-real time prices.
    2-defined stops--how does one know how much risk is in a trade without an exit point. Market club needs one.
    3-clunky to use to say the least--i mean real clunky.
    that's my opinion, doesn't mean it is right--but--anyone who disagrees is in a different world.

  7. lilja says:

    grate work..

  8. Larry Levin says:

    Hello Traders

    Larry Levin here. The Value Area (70% area) is available free of charge in my daily newsletter. Please sign up to get it at my website:

    http://www.tradingadvantage.com

    thanks,

    Larry Levin
    888-755-3846
    larrylevin@tradingadvantage.com

  9. Dana Lee says:

    As a neophyte investor, just learning about trading, I'm confused by this tip. How can I tell what range covered 70% of yesterday's trades? In the example shown, the text mentions a value range of 138500-139000, but the chart shows a scale value range of 116000-117000.

    It would be more helpful if your example showed a real trading day's chart and the following day's chart highlighting the two 30 minute periods when prices fell within the value range, and then show the executed price, the stops, etc.

    Thank you,

    Dana Lee
    Salem, OR

  10. Trendy says:

    What do you do if the market opens "in" the value area like the ES Minis did today? Sit on hands?

  11. Jay says:

    Great. How do you determine the value area? I guess that's Secret Tip #12. Big piece of the puzzle missing. No value here (pun intended)

  12. Nelson says:

    For an unruly guy,I gravitate Joyfully to the Trader that says, "I have a rule for you." Predicting market direction intraday always bugged me. Guess I'm just a slow learner!

  13. "The range of prices where 70% of yesterday’s volume took place." Does anybody know where to find this info?

    Ross T.

  14. Steve says:

    Very nice!

    1) Which instruments does this work (best) on?

    2) Where can we get accurate 70% volume info, or even the levels directly?

    3) Where would you set your stops using this strategy?

    Thanks

    Steve

  15. Tim says:

    How do you find the "Value Area"?

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