The S&P 500 eMini is popular with the four eMini futures to trade. Traders are beginning to appreciate the S&P 500 eMini because its trading action offers a “ middle ground ” compared to its staunch siblings, Dow-30, nascent leader, Nasdaq-100, and hypertensive brother, Russell 2000.

Trading the S&P 500 eMini (ES) requires an understanding of market dynamics and an idea of ​​where the price is heading. Close monitoring of the price action in the ES daily value area provides the trader with information on the intraday price direction.

The value area is defined as the price range of the instrument in which 70% of yesterday’s volume was traded. The Value Area is important because it defines the current ‘Comfort Zone’ where traders are comfortable operating under a neutral bias.

By taking into account the price movement with the value area, you can pinpoint the direction of the intraday price. The value area for the ES is particularly accurate in signaling the price direction because the ES is the “middle ground” eMini trading instrument.

Signals in the direction of intraday prices are very helpful for traders in quickly deciding which trades to take during the day. Here is an analysis of the signals in the value area.

80% rule sign. The 80% rule is easy to understand and fairly reliable in determining the direction of the market. When the market is above or below the Value Area, and then penetrates the Value Area for two consecutive half-hour periods, the market has an 80% chance of at least filling the Value Area.

The trader has the opportunity to place a trade once the signal is triggered and move the price up through the Value Area before deciding to exit the trade.

Above the value area signal. When the market opens and remains above the value area, this indicates a very strong uptrend. Institutional buying is happening in the market pushing the market higher. A trader may buy the market on dips, sometimes while testing the upper value of the value area, before it resumes its rally.

Below the value area sign. When the market opens and remains below the value area, this indicates a very strong downtrend. Institutional selling is happening in the market pushing the market down. You may be able to sell on market rallies, such as a value area bottom test, but you don’t want to trade long when institutions are selling.

Support / resistance signals. The bottom and top of the value area are excellent support and resistance levels. For example, if you were well above the value area, you would place a sell stop just below the top of the value area because if the market penetrates the value area, a strong downtrend is indicated. If you want to buy and the market is below the value area, you would place your buy order just above the bottom of the value area, because if the market penetrates the value area, a strong uptrend is indicated.

Also, watching the other eMini as the ES approaches the top or bottom of its Value Area can be very helpful in guiding a trader’s decision. For example, when the ES is within its Value Area but hovering just below its top of the Value Area, if the Nasdaq eMini is showing strength, then there is a higher probability that the ES will penetrate its value area. , indicating a bullish bias and a Buy. If the Nasdaq is showing weakness, then there is a higher probability that the ES will decline from the high of its value area, indicating a bearish bias and a sell.

In conclusion, considering the movement of the S&P 500 eMini relative to its Value Area is an excellent method of deciphering the direction of the market. The more a trader monitors the eMini price action in their value area, the better “in tune” the trader will be with its dynamics.