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Mind Over Markets: Power Trading with Market Generated Information

By James F. Dalton, Eric T. Jones and Robert B. Dalton
Copyright © 2013 by James F. Dalton, Eric T. Jones, and Robert B. Dalton

APPENDIX 1

Value-Area
Calculation
T he value area represents the area of greatest trade facilitation and
acceptance of value in the day timeframe and is signified by the price
region where 70 percent of the day’s volume occurred. It can be calculated
using either actual price/volume numbers or approximated by substituting
TPOs when volume is not available. 331

V olum e V alue-A rea C alculation

Figure A1.1 illustrates how to calculate the volume value area. First, identify
the price at which the greatest volume occurred. Then, sum the volumes
occurring at the two prices directly above the high-volume price and
compare it to the total volume of the two prices below the high-volume
price. The dual price total with the highest volume becomes part of the value
area. This process continues until 70 percent of the volume is reached.
In Figure A1.1, the greatest volume (22,168) occurred at 96–12. The
total volume for the two prices above 96–12 is 34,491 (Sum of Dual Prices)
and the two price total below is 43,773. Since the lower total is greater, it is
added to the high-volume price as part of the value area. The same process is
repeated, comparing the next two lower prices (96–15 and 96–16), to
96–10 and 96–11 again. The lower total is higher and is, therefore, the next
addition to the developing value area. This process is repeated until the
volume reaches 70 percent of the day’s total volume.
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APPENDIX 1

F IGUR E A 1.1 Volume Value-Area Calculation

TP O V alue-A rea C alculation

The calculation of the TPO value area follows the same general steps as the
volume value area. First, count the total number of TPOs, including the
single prints. Take 70 percent of this number to establish how many TPOs
approximate 70 percent of the day’s volume. Then, examine the two prices
above and below the longest line on the Profile, adding the two with a
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greater number of TPOs to the longest line. Continue this process until 70
percent of the TPOs are included.

Price Volume TPOs Selection Order

100–04 A
100–03 A
100–02 AL
100–01 AL
100–00 AL
99–31 AL
99–30 AL
99–29 AL
99–28 ACGKL 10 4
99–27 ABCGK
99–26 ABCGHK 16 2
99–25 ABCDEFGHIK
99–24 ABCDEFGHIJK 11 1
99–23 BCDEFHIJK 16 3
99–22 BCDEHIJ
99–21 BCDJ 4 5
333
99–20 BCD

APPENDIX 1
99–19 BC
99–18 B
99–17 B

High TPO Price

Only the closest price is used since it fulfilled the 70 percent or better
volume requirement.

Total TPOs 78 70% 54.6 or 55

Value area is 99–21 to 99–28 (73%)

For comparison, the volume value area was 99–20 to 99–30.