How Banks Trade and the Wyckoff Method

Jul 4, 2024

How Banks Trade and the Wyckoff Method

Introduction

  • Main market movements are driven by banks and financial institutions.
  • Retail traders have minimal impact on the market compared to big banks.
  • Presenter: Artie from The Moving Average.
  • Focus: Wyckoff Method, an advanced trading technique.

Key Concepts of the Wyckoff Method

1. Law of Supply and Demand

  • Supply > Demand: Price falls.
  • Demand > Supply: Price rises.
  • Tool: Volume bars.
    • Example: Flat price with massive volume indicates high demand or supply.

2. Law of Cause and Effect

  • Accumulation -> Uptrend (Cause and Effect)
  • Distribution -> Downtrend (Cause and Effect)
  • Examples:
    • Accumulation leading to uptrend.
    • Distribution leading to downtrend.

3. Law of Effort and Result

  • Examines volume bars in conjunction with price actions.
  • Effort and Result: Divergence or confluence between price and volume.
  • Example: Flat price but high volume indicates significant activity.

4. Composite Man

  • Market manipulated by "Composite Man" (banks, financial institutions).
  • Understand manipulations to align with market movements.

Trading Using the Wyckoff Method

4 Stages

  1. Accumulation
  • Bottom-end consolidation with high volume spikes.
  • Spring: False breakout traps traders.
  • Entry point for long positions.
  1. Markup
  • Price moves up after accumulation.
  1. Distribution
  • High-end consolidation.
  • Sign for short positions.
  1. Markdown
  • Price drops after distribution.

Recap

  • Accumulation: High volume, flat price, potential for markup.
  • Markup: Uptrend follows accumulation.
  • Distribution: High volume, flat price, potential for markdown.
  • Markdown: Downtrend follows distribution.
  • Watch for high volume "springs" for entry/exit points.

Market Manipulation by Composite Man

  • Buys during accumulation, sells during distribution.
  • Retail traders should recognize and align trades accordingly.

Additional Content

  • Advanced breakdown of phases (A to E) available upon request.
  • More in-depth videos suggested for those interested.

Conclusion

  • If you found this content helpful, like and subscribe to support the channel.
  • Check out the video on top 10 mistakes made by retail traders for more insights.