The Law of Supply and Demand When there is an excess amount of something supply the value of that item is reduced to draw in the demand needed to absorb that supply.

Or, if there is a scarcity of something, then the value of that item will increase to create the supply that will meet that demand. The Law of Cause and Effect In order for there to be an effect change in price , there needs to be a cause. The effect will be in direct proportion to that cause. If it is not, it is an indication of other principles in action. Think of the effort as the volume on a move, and the result is the corresponding price action.

These two should be in harmony. Richard Wyckoff took a five step approach to stock selection 1 Determine the present position and probable future trend of the market.

The above approach Mr Richard Wyckoff believed allowed the retail trader follow the market foot prints of the composite man to profits. The composite man can be defined as:. Let us call him the Composite Man, who, in theory, sits behind the scenes and manipulates the stocks to your disadvantage if you do not understand the game as he plays it; and to your great profit if you do understand it.

Richard Wyckoff believed the composite man acted in the stock market like a merchandising operator like a retail store: Buy summer hats in winter to sell in summer. Buy woolly jumpers in summer to sell in winter. It is a simple manner of managing stock float and manipulating the public to act in a manner that suits his operation [Richard Ney books goes into deep detail of the merchandising operation].

Richard Wyckoff believed that just like a merchandising operation, the composite man plans accumulation and the following mark up campaigns for the best results and the same for distribution and mark down. With no confusion or gaps in explanation that is so common is 'How I trade' books, Wyckoff produced charts, trading results, diaries and full explanations. Below are the best books and PDFs of Richard Wyckoff Logic. Clear your browser cache if image is not showing. How did Wyckoff Trade: Wyckoff would then purchase shares on the dips assuming the volume conditions warranted price action was still bullish.

Wyckoff avoided making trades during significant 'accumulation' and 'distribution' phases within the market. Wyckoff interviewed many famous traders of his time, this is how he learnt to apply the top down stock selection approach: Select the strongest index, select the strongest sectors within the index, select the strongest stocks within the sector strength was measured on an alpha basis or relative strength. Wyckoffian logic has found its way into a wide variety of modern day texts, once you read the original source you will clearly uncover adaptations of Richard Wyckoff theories.

Viewing price and volume action on a daily, weekly and monthly charts are the norm. We find favor with viewing price and volume action with Half Month charts that is start of month to the 15th, then 15th to end of the month , we see these as just right for a wider view of the price action.

And yes we can do quarterly as well, just for fun. He called it Volume Spread Analysis VSA , and it warrants your attention to learn this art. However a word of caution, many are using VSA as the definitive approach to execute trade decisions as if it was the Wyckoff method, they also assume that trading VSA can be applied with success no matter the phase of the market.

Our view is that the phase of the market is critical for the Wyckoff method to be successful.

As stated above Richard Wyckoff invested when the market entered a mark up or down phase, and we believe this approach should be maintained. VSA can and should be used to formulate a view of price action, but when the Wyckoff investor must execute a trade the market phase, index strength, sector strength and the stock's relative strength are every bit as critical as the VSA view.

You can learn more on the subject through Tom Williams books listed on our education page. We are great fans of VSA, our charts are very VSA friendly, plus we allow you to apply VSA multi time frame. The next chart shows you how to apply VSA to both the daily and half month chart at the same time. You can also use our Point and Figure charts to complete the Wyckoff accumulation and target exercises.

In Tim Ord's book The Secret Science of Price and Volume he explains how to review volume per price swings and when to be bullish or bearish. We added to this the percentage of the float traded each day and swing. The results are always very interesting when you apply Wyckoff logic to float traded as well as volume. Stock float data is not provided, we use the data from short squeeze.

Richard Wyckoff also uses the indicator called the Optimism Pessimism Index, this is in fact the modern day On Balance Volume indicator which is also available here.

Richard Wyckoff incorporated the 'Wyckoff Wave' Our symbol: RTWWV within his trading, this is a custom index made up of 12 leading stocks, one for each major market sector. Applying Hurst and Gann together tools only adds further value to the chart. Other site tools like the percentage trailing stop can help monitor the momentum as alert the chart reader to changes in behaviour that resemble 'Signs of Strength' or 'Signs of Weakness' that change momentum.

Wyckoff Stock Market Institute - Wyckoff Stock Market Course

Wyckoff Mapping of Chart Action: In the article titled 'Wyckoff Schematics: Visual templates for market timing decisions' pdf see our education page the authors map out the terminology used within a Wyckoff chart. The mapping of price action in this manner allowed Wyckoff to determine if and when his nine step formula had been achieved. Wyckoff new the process of accumulation or distribution was a minefield for the investor as the risk of being stopped out was high and the risk to reward ratio was poor.

Wyckoff uses the nine rules to determine when and if the accumulation or distribution process was to end and the price mark up or down process was about to be begin, the markup or down process being the ideal time to take an investment position.

Wyckoff wished only to invest in the markup or down phase of the stock price cycle, he also new determining the change over from accumulation or distribution to mark up or down phase was tricky and the risk of loss was at this time highly probable.

Wyckoff created the logical approach of the nine rules to be more scientific than artistic or discretionary to limit his risk. The nine rules for buying long into the markup process after an accumulation phase.

The nine rules for selling short into the mark down process after a distribution phase. Use point and figure charts to determine how far the stock is likely to move. But my greatest discovery was that a man must study general conditions, to size them so as to be able to anticipate probabilities.

Robert G Allen Novice Traders trade 5 to 10 times too big. This is one of the peculiarly dangerous months to speculate in stocks. The others are July, January, September, April, November, May, March, June, December, August and February. The APNSoft TreeView will only work on JavaScript enabled browsers.

Jesse Livermores Secret To Success. Home page investor image explanation. The great crash How to win in the stock market. How to survive a stock market crash. William J ONeil, CANSLIM. Barry Ritholtz keep it simple stupid. Gerald Loeb how to win. Paul Tudor Jones II. Richard Wyckoff is a success story.

Richard Wyckoff logic not working, this maybe why? Richard Wyckoff studied Jesse Livermore.

Bob Evans, renowned Wyckoff teacher. William Gann life story. William Gann Law of Vibration. Original Wyckoff and Wyckoff 2. Cycles for short term speculation.

The Richard Wyckoff Stock Trading Method - Business Insider

RTT Wyckoff Short Term model. RTT Steps of Cause and Effect. RTT Wyckoff Strength Weakness. These attributes are mutually inclusive and must be weighted equally before investing or trading in any Stock, ETF, Currency, Bond, Commodity, CFD or Mutual Fund.

All price data is sourced from daily data. All prices are local exchange time. Send us an Email. Indicator Library FAQs Search Site Symbols Available Education Advisors General Policy Privacy Policy Terms Of Use About Us. Gisv 'ClSdOnExp',UID ;if ClSdOnExp! Gisv 'ClSdOnClps',UID ;if ClSdOnClps! Gisv 'nids' ;if nids! Gisv 'ClSdOnUnck',UID ;if tv. Gisv 'ClSdOnChk',UID ;if CS!

The originator of this method is from the writings of Richard D Wyckoff. At age 25, he opened his own brokerage office which gave him close contact with several the most important and influential traders Wall Street has ever seen.

He studied the market operations of Jay Gould, Jesse Livermore, J. Morgan, Andrew Carnegie, along with many others, all in an effort to develop his own approach to the market.

Analyzing and Trading Markets Using the Wyckoff Method - Part III

These were men who studied the market, understood how and why it moved, and profited from it. Merrill, and Richard D. He believed that the behavior observed through price and volume movements held the key to to forecasting future market movements. These observations led Wyckoff to believe that the market operated under a set of three laws.

The composite man can be defined as: Studies in Tape Reading Jesse Livermore's Methods of Trading in Stocks Best Trading Lessons of Jesse Livermore Charting The Stock Market, The Wyckoff Method Making It in the Market: Richard Ney's Low-Risk System for Stock Market Investor. Visual templates for market timing decisions pdf Wyckoff Associates, Inc course book1: Method of Tape Reading Wyckoff Associates, Inc course book2: Tape Reading and Active Trading Bob Evans Wyckoff teacher,founder Wyckoff Associates audio tapes, known as 'Evans Echoes'.

Wyckoff Unleashed, Wyckoff SMI online course material. These books are a great and best place to start: There is a formal Wyckoff education process from 'Wyckoff Stock Market Institute'. The Wyckoff Stock Market Institute WyckoffSMI. The Wyckoff Way When you understand the Wyckoffian phases of the market, you can determine when to be in or out of the market. You begin to understand how the large accounts determining market the trend, change of trend and price action.

Consider the below application of Wyckoffian terms to the modern day SP For more detail on the Wyckoff phase labels: Visual templates for market timing decisions pdf via our education page. Annotations placed on the chart via Paint. Net Click for popup. Here is a example of Richard Wyckoff Price action road map. Cause and Effect How did Wyckoff Trade: In more detail, the Richard Wyckoff price target calculation: The nine rules for buying long into the markup process after an accumulation phase 1 Downside Objective Accomplished PnF 2 Bullish Price Behavior 3 Preliminary Support and Selling climax PnF 4 Stronger than the Market: The nine rules for selling short into the mark down process after a distribution phase 1 Upside Objective Accomplished PnF 2 Bearish Price Behavior 3 Preliminary Supply and Buying Climax PnF 4 Weaker than the Market: The nine steps above are a subset of Wyckoff 5 overall leading steps of evaluation: The Wyckoff mapping process is fun and as it puts sign posts on the chart to the direction of Mr Market.

You may think that the Wyckoff accumulation and distribution patterns below are just a mirror of the standard technical analysis of double tops, triple tops and head and shoulders, well they do capture those, but they also capture the more complicate patterns. The Wyckoff approach analyzes the inner behavior of the price action to determine if Mr Market is about employ a mark up or down phase. Let's face it, not all patterns break out into tradable trends, they can morph into another pattern.

The approach below is the Wyckoff method for filtering out those accumulation and distribution patterns that lack clarity. The only pattern that would not suit this approach is a V reversal pattern as an accumulation or distribution base is not present, this pattern is rare, therefore we would say most of the time the Wyckoff approach is applicable.

Here are the headline phases of a stock price. Here are the Golden Gate University professors of the Wyckoff course talking about the 'Wyckoff phases'. The Accumulation phase with Wyckoff sign posts. Wyckoff Phases of Accumulation Phase A: In phase A, supply has been dominant and it appears that finally the exhaustion of supply is becoming evident. The approaching exhaustion of supply or selling is evidenced in preliminary support PS and the selling climax SC where a widening spread often climaxed and where heavy volume or panicky selling by the public is being absorbed by larger professional interests.

Once these intense selling pressures have been expressed, and automatic rally AR follows the selling climax. A successful secondary test on the downside shows less selling that on the SC and with a narrowing of spread and decreased volume. A successful secondary test ST should stop around the same price level as the selling climax.

The lows of the SC and the ST and the high of the AR set the boundaries of the trading range TR. Horizontal lines may be drawn to help focus attention on market behavior. It is possible that phase A will not include a dramatic expansion in spread and volume.

However, it is better if it does, because the more dramatic selling will clear out more of the sellers and pave the way for a more pronounced and sustained markup. Where a TR represents a reaccumulation a TR within a continuing up-move , you will not have evidence of PS, SC, and ST. Instead, phase A will look more like phase A of the basic Wyckoff distribution schematic.

Nonetheless, phase A still represents the area where the stopping of the previous trend occurs. Trading range phases B through E generally unfold in the same manner as within an initial base area of accumulation.

The function of phase B is to build a cause in preparation for the next effect. In phase B, supply and demand are for the most part in equilibrium and there is no decisive trend. Although clues to the future course of the market are usually more mixed and elusive, some useful generalizations can be made. In the early stages of phase B, the price swings tend to be rather wide, and volume is usually greater and more erratic. As the TR unfolds, supply becomes weaker and demand stronger as professionals are absorbing supply.

The closer you get to the end or to leaving the TR, the more volume tends to diminish. Support and resistance lines usually contain the price action in phase B and will help define the testing process that is to come in phase C. The penetrations or lack of penetrations of the TR enable us to judge the quantity and quality of supply and demand.

In phase C, the stock goes through testing. It is during this testing phase that the smart money operators ascertain whether the stock is ready to enter the markup phase. The stock may begin to come out of the TR on the upside with higher tops and bottoms or it may go through a downside spring or shakeout by first breaking previous supports before the upward climb begins.

This latter test is preferred by traders because it does a better job of cleaning out the remaining supply of weak holders and creates a false impression as to the direction of the ultimate move. A spring is a price move below the support level of a trading range that quickly reverses and moves back into the range. It is an example of a bear trap because the drop below support appears to signal resumption of the downtrend. In reality, though, the drop marks the end of the downtrend, thus trapping the late sellers, or bears.

The extent of supply, or the strength of the sellers, can be judged by the depth of the price move to new lows and the relative level of volume in that penetration. Until this testing process, you cannot be sure the TR is accumulation and hence you must wait to take a position until there is sufficient evidence that markup is about to begin. If we have waited and followed the unfolding TR closely, we have arrived at the point where we can be quite confident of the probable upward move.

If we are correct in our analysis and our timing, what should follow now is the consistent dominance of demand over supply as evidenced by a pattern of advances SOSs on widening price spreads and increasing volume, and reactions LPSs on smaller spreads and diminishing volumes. If this pattern does not occur, then we are advised not to add to our position but to look to close out our original position and remain on the sidelines until we have more conclusive evidence that the markup is beginning.

Your aim here must be to initiate a position or add to your position as the stock or commodity is about to leave the TR. At this point, the force of accumulation has built a good potential as measured by the Wyckoff point-and-figure method. In phase D, the markup phase blossoms as professionals begin to move into the stock.

It is here that our best opportunities to add to our position exist, just as the stock leaves the TR. Depicts the unfolding of the uptrend; the stock or commodity leaves the trading range and demand is in control.

Stock Trading Course, BetterTrades - Optionetics - Investools - Steve Nison

Sell offs are usually feeble. Wyckoff Accumulation Events PS: Preliminary support, where substantial buying begins to provide pronounced support after a prolonged down-move. Volume increases and price spread widens, signaling that the down-move may be approaching its end.

Selling climax, the point at which widening spread and selling pressure usually climaxes, as heavy or panicky selling by the public is being absorbed by larger professional interests at or near a bottom.

Often price will close well off the low in a SC, reflecting the buying by these large interests. Automatic rally, which occurs because intense selling pressure has greatly diminished.

A wave of buying easily pushes prices up; this is further fueled by short covering. The high of this rally will help define the upper boundary of an accumulation TR. If a bottom is to be confirmed, volume and price spread should be significantly diminished as the market approaches support in the area of the SC.

It is common to have multiple STs after a SC. A terminal shakeout at the end of an accumulation TR is like a spring on steroids. Shakeouts may also occur once a price advance has started, with rapid downward movement intended to induce retail traders and investors in long positions to sell their shares to large operators.

However, springs and terminal shakeouts are not required elements.. Large operators always test the market for supply throughout a TR e. If considerable supply emerges on a test, the market is often not ready to be marked up.

A spring is often followed by one or more tests; a successful test indicating that further price increases will follow typically makes a higher low on diminished volume.

Sign of strength, a price advance on increasing spread and relatively higher volume. Last point of support, the low point of a reaction or pullback after a SOS.

Backing up to an LPS means a pullback to support that was formerly resistance, on diminished spread and volume. On some charts, there may be more than one LPS, despite the ostensibly singular precision of this term. This term is short-hand for a colorful metaphor coined by Robert Evans, one of the leading teachers of the Wyckoff method from the s to the s.

A back-up is a common structural element preceding a more substantial price mark-up, and can take on a variety of forms, including a simple pullback or a new TR at a higher level.

The Distribution phase with Wyckoff sign posts. Wyckoff Phases of Distribution Phase A: In Phase A, demand has been dominant and the first significant evidence of demand becoming exhausted comes at preliminary supply PSY and at the buying climax BC. It often occurs in wide price spread and at climactic volume. This is usually followed by an automatic reaction AR and then a secondary test ST of the BC, usually upon diminished volume.

This is essentially the inverse of phase A in accumulation. As with accumulation, phase A in distribution price may also end without climactic action; the only evidence of exhaustion of demand is diminishing spread and volume.

Where redistribution is concerned a trading range within a larger continuing down-move , you will see the stopping of a down-move with or without climactic action in phase A. However, in the remainder of the trading range TR for redistribution, the guiding principles and analysis within phases B through E will be the same as within a TR of a distribution market top. The building of the cause takes place during phase B.

One of the ways phase C reveals itself after the standoff in phase B is by the sign of weakness SOW. Last point of supply gives you your last opportunity to exit any remaining longs and your first inviting opportunity to exit any remaining longs and your first inviting opportunity to take a short position. An upthrust is the opposite of a spring. It is a price move above the resistance level of a trading range that quickly reverses itself and moves back into the trading range.

An upthrust is a bull trap — it appears to signal a start of an uptrend but in reality marks the end of the up-move. The magnitude of the upthrust can be determined by the extent of the price move to new highs and the relative level of volume in that movement. Phase C may also reveal itself by a pronounced move upward, breaking through the highs of the trading range.

This is shown as an upthrust after distribution UTAD. Like the terminal shakeout in the accumulation schematic, this gives a false impression of the direction of the market and allows further distribution at high prices to new buyers. It also results in weak holders of short positions surrendering their positions to stronger players just before the down-move begins.

Should the move to new high ground be on increasing volume and relative narrowing spread, and price returns to the average level of closes of the TR, this would indicate lack of solid demand and confirm that the breakout to the upside did not indicate a TR of accumulation, but rather a formation of distribution.

When analyzing a trading range, we are first seeking to uncover what the law of supply and demand is revealing to us. However, when individual movements, rallies, or reactions are not revealing with respect to supply and demand, it is important to remember the law of effort versus result. It will also be useful to employ the law of cause and effect.

Within the dynamics of a trading range, the force of accumulation or distribution gives us the cause and the potential opportunity for substantial trading profits. Phase D arrives and reveals itself after the tests in phase C show us the last gasps or the last hurrah of demand. In phase D, the evidence of supply becoming dominant increases either with a break through the ice or with a further SOW into the trading range after an upthrust.

In phase D, you are also given more evidence of the probable direction of the market and the opportunity to take your first or additional short positions. Your best opportunities are at rallies representing LPSYs before a markdown cycle begins. Your legging in of the set of positions taken within phases C and D represents a calculated approach to protect capital and maximize profit. It is important that additional short positions be added or pyramided only if your initial positions are in profit.

Depicts the unfolding of the downtrend; the stock or commodity leaves the trading range and supply is in control. Rallies are usually feeble. Wyckoff Distribution Events PSY: Preliminary supply, where large interests begin to unload shares in quantity after a pronounced up-move. Volume expands and price spread widens, signaling that a change in trend may be approaching. Buying climax, during which there are often marked increases in volume and price spread. The force of buying reaches a climax, and heavy or urgent buying by the public is being filled by professional interests at prices near a top.

A BC often occurs coincident with a great earnings report or other good news, since the large operators require huge demand from the public to sell their shares without depressing the stock price. With demand substantially diminished after the BC and heavy supply continuing, an AR takes place. The low of this selloff helps define the lower boundary of a distribution TR. If a top is to be confirmed, supply will outweigh demand, and volume and spread should decrease as price approaches the resistance area of the BC.

A ST may take the form of an upthrust UT , in which price moves above the resistance represented by the BC and possibly other STs, then quickly reverses to close below resistance. After a UT, price often tests the lower boundary of the TR. Sign of weakness, observable as a down-move to or slightly past the lower boundary of the TR, usually occurring on increased spread and volume.

The AR and the initial SOW s indicate a change of character in the price action of the stock: Last point of supply. After testing support on a SOW, a feeble rally on narrow spread shows that the market is having difficulty advancing.

This inability to rally may be due to weak demand, substantial supply or both. A UTAD is the distributional counterpart to the spring and terminal shakeout in the accumulation TR. It occurs in the latter stages of the TR and provides a definitive test of new demand after a breakout above TR resistance.

Analogous to springs and shakeouts, a UTAD is not a required structural element: The re accumulation and re distribution phase with Wyckoff sign posts. This site has a tool to color zone the each phase called 'Wyckoff Campaign Phases found in the Analysis chart object tool box.

Example Click for popup. Terminology for the abbreviations as supplied by the article 'Wyckoff Schematics: Visual templates for market timing decisions'. More definitive information here AR.