A look back at Trader Vic's "Four-Day Rule"

These rules are in Trader Vic Sperandeo's book "Trader Vic II - Principles of Professional Speculation".

The Four-Day Rule

"When the market has a reversal, in the form of a 4-day up or down sequence from a high or a low, after an intermediate move has taken place, the odds of the trend having change is very high."

"The Four-Day Rule" is illustrated by the green line and arrow on the chart below -- the first four-day sequence since the metals complex topped last September.

The Four-Day Corollary

"After a long move of intermediate proportions, when you have 4-day (or longer) sequence in the direction of the trend, the first day in the opposite direction often signifies the top or the bottom and change in trend."

And "The Four-Day Corollary" is illustrated by the red line and arrow in September -- the four or more (five in this case) days in the direction of trend with the first day down signifying the top.

And to my mind, they are both examples of why Trader Vic has been and still is one of the greatest traders and technical market analysts ever.

Good luck and good trading.

http://stockcharts.com/c-sc/sc?s=$HUI&p=D&yr=0&mn=11&dy=0&i=p06333605083&a=268908935&r=1338996161502.png

P.S. If you have not read Vic's books, you probably should not be in this game. Just my opinion.

Take the "Frequently Bought Together"

Just noticed that September on this live chart has moved off since this post in June. There's an update of the chart below.

Notably, there are only four-day sequences that fit rule and its corollary on this chart, the top in September, and bottom in May. Appears the Trader Vic's rule is compelling, and it will on some index, sometime, repeat.

Good luck and good trading.

http://stockcharts.com/c-sc/sc?s=$HUI&p=D&yr=1&mn=3&dy=0&i=t27272784184&a=268908935&r=1347584959004.png