Introduction:
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Richard Demille Wyckoff (November 2, 1873 – March 7, 1934) was considered one of the five “titans” of technical analysis , along with Dow, Gann , Elliott and Merrill.
Wyckoff was an avid student of the markets, as well as an active tape reader and trader. He observed the market activities and campaigns of the legendary stock operators of his time, including JP Morgan and Jesse Livermore. From his observations and interviews with those big-time traders, Wyckoff codified the best practices of Livermore and others into laws, principles and techniques of trading methodology, money management and mental discipline.
Laws of Wyckoff
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Wyckoff Analysis is fundamentally based off the Three Laws of Wyckoff, which can be found and recognized across many different types of Analysis, the Laws help give insight to our analysis and choice of buying/selling.
The Three Laws of Wyckoff are:
Supply & Demand
Effort vs. Result
Cause & Effect
Law #2: Effort vs. Result
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Wyckoff states that every effort should lead to a result in the financial markets.
The above example describes the concept of Effort vs Result in a Trading Range (Parallel Channel) using Volume & Price Based Analysis
This statement is applied to our charts by using data found on Trading View from the Volume Indicator. When we see abnormally large trading volume at key areas on the chart, such as a defined "TR (Trading Range)" we can usually expect a continued move in that direction, this is called the Breakout of the range.
But if buyers cannot gather enough momentum to continue the Breakout action, they may become trapped, and as prices fall back inside of the defined area, their Effort has produced no Result. That abnormally large trading volume can give us a potential sign that the participants betting on the market to move in that direction failed to gather enough momentum to do so (Light Blue), which leads to them being trapped (Dark Blue) and then a reverse in the opposite direction in price (Purple).
This kind of Analysis is not just "fixed" to the bottom or top of a Trading Range, Effort vs Result can be interpreted a number of ways, for example in the below image we can see that the Effort in this case was not outside of the range, but a failure from the buyers to hold prices INSIDE the range:
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Richard Demille Wyckoff (November 2, 1873 – March 7, 1934) was considered one of the five “titans” of technical analysis , along with Dow, Gann , Elliott and Merrill.
Wyckoff was an avid student of the markets, as well as an active tape reader and trader. He observed the market activities and campaigns of the legendary stock operators of his time, including JP Morgan and Jesse Livermore. From his observations and interviews with those big-time traders, Wyckoff codified the best practices of Livermore and others into laws, principles and techniques of trading methodology, money management and mental discipline.
Laws of Wyckoff
---------------------------------
Wyckoff Analysis is fundamentally based off the Three Laws of Wyckoff, which can be found and recognized across many different types of Analysis, the Laws help give insight to our analysis and choice of buying/selling.
The Three Laws of Wyckoff are:
Supply & Demand
Effort vs. Result
Cause & Effect
Law #2: Effort vs. Result
---------------------------------
Wyckoff states that every effort should lead to a result in the financial markets.
The above example describes the concept of Effort vs Result in a Trading Range (Parallel Channel) using Volume & Price Based Analysis
This statement is applied to our charts by using data found on Trading View from the Volume Indicator. When we see abnormally large trading volume at key areas on the chart, such as a defined "TR (Trading Range)" we can usually expect a continued move in that direction, this is called the Breakout of the range.
But if buyers cannot gather enough momentum to continue the Breakout action, they may become trapped, and as prices fall back inside of the defined area, their Effort has produced no Result. That abnormally large trading volume can give us a potential sign that the participants betting on the market to move in that direction failed to gather enough momentum to do so (Light Blue), which leads to them being trapped (Dark Blue) and then a reverse in the opposite direction in price (Purple).
This kind of Analysis is not just "fixed" to the bottom or top of a Trading Range, Effort vs Result can be interpreted a number of ways, for example in the below image we can see that the Effort in this case was not outside of the range, but a failure from the buyers to hold prices INSIDE the range:
---------------------------------
Thank you and if you found this writeup insightful and informative don't forget to hit Subscribe, Like & Comment to show your appreciation. Visit my signature for further education on these concepts in action
