Where does the 70% come from?

From plus or minus one standard deviation of a normal distribution, which covers 68.27%, rounded to 70% by the CBOT. The analogy is loose — real distributions are skewed and often have two peaks — so it is best read as a durable convention rather than a statistic.

Can the value area contain more than 70%?

No. The algorithm stops before exceeding the target, so the band contains at most the target and usually a little less. Values in the low-to-mid sixties are common when the rows are large.

What do VAH and VAL stand for?

Value area high and value area low: the upper and lower boundaries of the band. Above the VAH is often called premium, below the VAL discount — measured boundaries rather than eyeballed ones.

Glossary

Value area (VAH / VAL)

Also called: VA · value area high · value area low

The value area is the contiguous band around the point of control containing roughly 70% of a period's volume, bounded by the value area high and low. The 70% is a CBOT convention rounded from one standard deviation, adjustable between 50 and 80 — not a statistical law.

How it is actually calculated

Not by sorting rows by volume, which is what most people assume. Sorting would break contiguity, and the value area is by definition a continuous band. The canonical method is an expansion anchored on the point of control:

Set a target of 70% of total volume. Start at the point of control and subtract its volume from the target. Compare the row immediately above the current band with the row immediately below, take the larger, and add it if doing so does not exceed the target. If it would exceed, stop. Repeat.

Because the algorithm stops before exceeding the target, the value area always contains at most the target percentage, never exactly it. A band that reports exactly 70.0% was not built this way.

One row at a time, or two

Two algorithms coexist. The modern one adds a single row per step. The classic CBOT method sums the two rows on each side and adds them in pairs — Sierra Chart exposes it as Count 2 Levels at a Time.

They produce boundaries that differ by a tick or two on the same session. That is why documenting your exact construction matters before comparing anything, or you end up measuring an implementation difference and calling it an edge.

A worked example

A synthetic ES session totals 825 847 contracts, so the 70% target is 578 093. Expanding from the point of control, the band reaches 577 146 contracts and stops — adding the next row would overshoot. The result is 69.9%, not 70%.

The boundaries land at 5 326.00 and 5 335.00: 36 ticks, nine points, 450 $ per contract from the low edge to the high edge.

The trap

Treating the value area edges as walls. They are the boundary of what the market accepted during one window — a reference for deciding whether a move out is being accepted or rejected, not a barrier.

The related trap is the 80% rule: if a market opens outside the previous value area, re-enters, and holds inside for two consecutive 30-minute periods, it is said to have roughly an 80% chance of traversing the entire value area. The entry condition is objective and worth watching. The 80% has never been publicly replicated, and should be treated as a field heuristic rather than a probability.

Frequently asked

Where does the 70% come from?: From plus or minus one standard deviation of a normal distribution, which covers 68.27%, rounded to 70% by the CBOT. The analogy is loose — real distributions are skewed and often have two peaks — so it is best read as a durable convention rather than a statistic.
Can the value area contain more than 70%?: No. The algorithm stops before exceeding the target, so the band contains at most the target and usually a little less. Values in the low-to-mid sixties are common when the rows are large.
What do VAH and VAL stand for?: Value area high and value area low: the upper and lower boundaries of the band. Above the VAH is often called premium, below the VAL discount — measured boundaries rather than eyeballed ones.