Acceptance and Rejection at Value Area Edges: The 80% Rule and Look Above and Fail, Tested Honestly
Lesson 8 of 9 · Advanced
How do you define acceptance and rejection?
Nearly every volume profile decision comes down to one question: when price moves outside a value area edge (VAH or VAL), is it accepted there or rejected? To make that question testable you need an operational definition, not a feeling.
Signs of acceptance:
- Time: price stays outside the edge for at least two consecutive 30-minute periods (a common threshold, but still a convention).
- Volume: meaningful volume builds outside the edge and a small HVN forms.
- Value migration: the developing POC and today's value area move outside yesterday's value.
Signs of rejection: a quick return inside value, low volume outside the edge, a tail or single prints at the extreme, and a POC that stays inside the previous value.
What matters is that you fix the thresholds before looking at the chart. If you change the definition after seeing the outcome, any pattern will look excellent.
What does the 80% rule say?
The 80% rule is one of the best-known ideas in the Market Profile literature. The usual form is: if the market opens outside the previous day's value area, then returns inside it and stays there for two consecutive 30-minute periods, there is a high probability that it will travel to the opposite edge of the value area.
The logic fits auction theory: the market offered a new price outside value, got no response and returned to the old value. Once the old value is accepted again, the market tends to traverse all of it.
Hypothetical GC example: yesterday's value area is 3,992.5 to 4,013.5. Today the market opens at 4,018 (above the VAH), drops back to 4,011 in period B, and periods B and C both close inside value. According to the idea, the VAL near 3,992.5 is a logical objective. Note that there are several versions: some treat one period as enough, some do not require the open to be outside value, and some use the TPO value area while others use the volume value area. These numbers are illustrative only.
The honest evidence: is it really 80 percent?
The name "80%" is a historical label, not a verified statistic for today. Independent tests by different traders and researchers across different markets have reported widely varying rates, and these change with the market, the time period, the session definition and the version of the rule. For gold there is no reliable public number you can lean on.
Even if the rate of reaching the opposite edge were high, that would not mean the approach is profitable. The right question is: does price reach the opposite edge before hitting a sensible invalidation level (for example just beyond the entry edge)? To test it yourself:
- Write the exact version of the rule: the opening condition, the number of periods, the type of value area and the session definition.
- Find all qualifying days across several years of gold futures data, not just the ones you remember.
- For each event, record whether the target was reached before invalidation, the maximum favourable and adverse excursion, and the time taken.
- Subtract costs and slippage, and check the result on a period you did not use when designing the rule.
Look Above and Fail and Look Below and Fail
This pattern is the mirror image of acceptance. Price goes above an important reference such as the VAH, the previous day's high or the top of a bracket (looking above), but finds no new buyers there: little volume builds, it does not stay long, and price returns inside the prior area (failing). The reading is that the market tested higher prices and rejected them, so a move toward the POC or even the opposite edge is more logical than continuation upward. Look Below and Fail is the same logic on the downside.
The difference from an ordinary pullback is in the details. To identify the "fail" you need pre-set criteria: for example, a return inside value within one 30-minute period, no HVN outside the edge, and a tail at the extreme. If price goes back out after returning and this time stays, the pattern is invalidated and a genuine breakout may be under way.
When do these ideas work, and when do they not?
- Better: in rotational markets and multi-day brackets, when yesterday's value area is meaningful and not too wide, and the news calendar is quiet.
- Worse: on trend days, on days with major economic releases, and when yesterday's value area is so wide that crossing it would take a whole day.
- Warning: both ideas are about probabilities, and probabilities change with the market regime. What looked good in one range-bound year can look weak in the following trending year.
Common mistakes
- Accepting 80 percent as a real probability without testing it on gold data and the exact version of the rule.
- Changing the definition of acceptance and rejection after seeing the outcome, which makes every pattern look perfect.
- Counting only target hits and ignoring whether the invalidation level was hit first.
- Applying Look Above and Fail on a day with major news or clear trend-day signs.
What does volume say here?
Value area edges are exactly where order flow adds the most:
- Look Above and Fail with order flow: aggressive buying shows above the VAH, but the footprint reveals that resting sell limit orders absorbed it and price did not advance; then delta turns negative and price returns inside. That combination says more than a simple price reversal.
- Acceptance with order flow: same-direction stacked imbalances outside the edge, cumulative delta moving with price, and pullbacks on light aggressive volume.
- On the 80% rule: a return inside value accompanied by strong delta toward the opposite edge fits the rule's logic better; if price is back inside but delta is still opposed, be cautious. As with the rule itself, these observations need to be tested on data.
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Frequently asked questions
What is the 80% rule in Market Profile?
If the market opens outside the previous day's value area, returns inside it and stays for two consecutive 30-minute periods, the idea says it is likely to travel to the opposite edge of value.
Is the 80% rule really 80 percent accurate?
Not necessarily. 80% is the rule's historical name. Independent tests show varying rates that depend on the market, period and definition, so it has to be tested on your own data.
What does Look Above and Fail mean?
Price trades above a reference such as the VAH or the previous high, fails to build enough volume and time there, and returns inside the prior area, meaning the higher price was tested and rejected.
Education only, not a recommendation to buy or sell; we never give signals. Price examples are illustrative. Test any method on a demo account first, with strict risk management.