WYCKOFF RULE #2
The longer and deeper the accumulation phase is, the more powerful the breakout trend, “markup phase” will probably be.
Three Wyckoff Rules
Rule #1:
Price action is determined by supply and demand. While this rule seems entirely obvious,
deep learning of supply and demand dynamics is a fundamental part of the analysis.
The Wyckoff method uses several tools towards this end, namely point and figure charts, price-volume analysis, and reference to the market cycle.
Rule #2:
Use cause and effect to identify accumulation and distribution phases.
A more basic understanding of this rule is the general principal that the longer and deeper the accumulation phase is,
the more powerful the breakout trend, “markup phase” will probably be.
Rule #3:
Effort versus result can signal trend reversal. A simplistic interpretation of this rule is to identify divergences between volume and price action.
As an example, consider where there is a high turnover of volume but little resultant price action.
Wyckoff’s 3rd rule says that this is likely to be a market turning point because it suggests an exchange between smart money and dumb money
Analyses of Trading Ranges
One objective of the Wyckoff method is to improve market timing when establishing a position in anticipation of a coming move where a favorable reward/risk ratio exists.
Trading ranges (TRs) are places where the previous trend (up or down) has been halted and there is relative equilibrium between supply and demand.
Institutions and other large professional interests prepare for their next bull (or bear) campaign as they accumulate (or distribute) shares within the TR.
In both accumulation and distribution TRs, the Composite Man is actively buying and selling -
the difference being that, in accumulation, the shares purchased outnumber those sold while, in distribution, the opposite is true.
The extent of accumulation or distribution determines the cause that unfolds in the subsequent move out of the TR.
The longer and deeper the accumulation phase is, the more powerful the breakout trend, “markup phase” will probably be.
Three Wyckoff Rules
Rule #1:
Price action is determined by supply and demand. While this rule seems entirely obvious,
deep learning of supply and demand dynamics is a fundamental part of the analysis.
The Wyckoff method uses several tools towards this end, namely point and figure charts, price-volume analysis, and reference to the market cycle.
Rule #2:
Use cause and effect to identify accumulation and distribution phases.
A more basic understanding of this rule is the general principal that the longer and deeper the accumulation phase is,
the more powerful the breakout trend, “markup phase” will probably be.
Rule #3:
Effort versus result can signal trend reversal. A simplistic interpretation of this rule is to identify divergences between volume and price action.
As an example, consider where there is a high turnover of volume but little resultant price action.
Wyckoff’s 3rd rule says that this is likely to be a market turning point because it suggests an exchange between smart money and dumb money
Analyses of Trading Ranges
One objective of the Wyckoff method is to improve market timing when establishing a position in anticipation of a coming move where a favorable reward/risk ratio exists.
Trading ranges (TRs) are places where the previous trend (up or down) has been halted and there is relative equilibrium between supply and demand.
Institutions and other large professional interests prepare for their next bull (or bear) campaign as they accumulate (or distribute) shares within the TR.
In both accumulation and distribution TRs, the Composite Man is actively buying and selling -
the difference being that, in accumulation, the shares purchased outnumber those sold while, in distribution, the opposite is true.
The extent of accumulation or distribution determines the cause that unfolds in the subsequent move out of the TR.