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 Sperandeoâs 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....
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...