Discussion in 'Technical Analysis' started by Pekelo, Jun 23, 2011.

  1. Pekelo


    This thread is about testing TVGR, or Trader Vic's Gap Rule, since recently we have gaps all over the place....

    Here it is in short:

    "The Trader Vic Gap Rule (TVGR) "If there is a gap, and it is going to reverse, it will do so 10-15 minutes after the opening 95% of the time. Please believe me on the odds, they are real. If the market continues in the direction of the gap after 10 to 15 minutes, it is a strong sign that the move will continue for the rest of the day, closing in that direction as well. Even if the market reverses after the 10-15 minute period, if it fails to fill the gap, odds are that the market will close in the direction of the gap."

    This Rule is cited from Victor Sperandeo’s book: Trader Vic II: Principles of Professional Speculation, pg. 231


    So basicly if the first three 5 minutes bar indicates a movement in the direction of the gap, then we can expect that move to last for the whole day. So a simple trading strategy would be to wait until 9:45 and take a position according to what those 3 bars indicate and hold it either until gapclose or the end of the day...

    #1 example: On June 20th we had a downgap of 4+ ES points. By the end of the 3rd 5 mins bar the gap was closed and it continued upward for the rest of the day. Although the gap was small and filled too soon, the rule was confirmed. Taking a long at 9:45 would have given 6 pts by the close. (I think the rule only calls for a gapclose, not necesserily for a continuation, and again, the gap closed too soon in this case.)

    #2 example: On June 21st, we had a 6 pts upgap, and all 3 bars where green. Sure enough, the market continued upward for the rest of the day, so rule confirmed. Taking a long at 9:45 would have given 12 ES pts.

    #3 example: On June 22nd, we had a downgap of 5 pts and the indication was a gapclose after 15 mins. The gap did close at the end of the 4th bar, a bit too soon to take anvantage of it. Rule confirmed....

    #4 example: Today June 23rd, we have a huge downgap of 17 pts, and after seeing the first 15 mins the indication calls for more downside. We shall see....
  2. :eek:
  3. Thank you for posting this Really good examples
  4. Pekelo


    It didn't work. Although the position was breakeven until 2:50 pm, the rally at the end of the day put it in the red by 12 pts.

    The next day we had a downgap, but the first 15 mins' action was so inconclusive, that it was hard to determine what we suppose to expect...