Ultimate Wyckoff Trading Course

Introduction

• Purpose: Learn the basics of Wyckoff trading approach.
• Audience: Suitable for retail traders who want to compete efficiently against large traders.
• Channel Support: Encouraged to like and subscribe for future updates and support.

Wyckoff Methodology Overview

• Problem: Retail traders often lose to large traders due to disparity in resources, knowledge, and psychology.
• Solution: Trade with the large traders by identifying their actions using the Wyckoff methodology.
• Nature of Wyckoff Methodology: Logical, flexible, and adaptable to various trading conditions.
• Key Assumptions: Trading psychology and market behavior of large traders leave footprints that can be analyzed.

Historical Background

• Richard Wyckoff: Born in 1873. Observed market behavior and chart patterns as a broker.
• Success: Became successful on Wall Street using his methodology based on market actions and footprints.

Core Concepts

Market Phases

1. Accumulation: Buyers accumulate shares at lower prices.
2. Uptrend: Market sees higher highs/lows as buyers dominate.
3. Distribution: Sellers dominate; they distribute at higher prices.
4. Downtrend: Lower highs/lows as sellers dominate.

Fundamental Laws

1. Law of Supply and Demand: Market price seeks equilibrium where supply meets demand.
2. Law of Cause and Effect: Ranges (causes) create trends (effects) proportional to their size.
3. Law of Effort and Result: Volume (effort) should match price action (result).

Supply and Demand Mechanics

• Buyer and Seller Behavior: High demand/low supply raises prices; high supply/low demand lowers prices.
• Price Movements: Determined by aggressive (market orders) and passive (limit orders) supply and demand.

Four Phases of Price Action

• Accumulation: Buyers create a support level (base).
• Uptrend: Breakout from accumulation zone on high demand.
• Distribution: Sellers create resistance; supply overtakes demand.
• Downtrend: Breakdown from distribution zone on high supply.
• Re-Accumulation/Redistribution: Continuation of a trend after a pause.

Key Events in Wyckoff Method

1. Preliminary Stop: Initial large trader movements indicating trend change.
2. Climax: High volume, wide range candle indicating trend exhaustion.
3. Reaction: Sharp move opposite climax, confirming change of character.
4. Secondary Test: Tests the level of climax with lower volume.
5. False Breakout: Most critical event, traps uninformed traders at liquidity zones.
6. Breakout: True breakout from the range confirming new trend direction.
7. Confirmation: Validates breakout with no supply/demand candles.

Phases According to Wyckoff

• Phase A: Stop of the previous trend (Preliminary Stop, Climax, Reaction, Secondary Test).
• Phase B: Construction of the cause (successive secondary tests).
• Phase C: Test phase/front running (false breakout event).
• Phase D: Trend inside the range (Breakout and Confirmation).
• Phase E: Trend outside the range (fully developed trend).

Analyzing Market Structures

Horizontal Structures

• Accumulation: Preliminary support, selling climax, automatic rally, secondary tests, true breakout (jump across the creek), last point of support.
• Distribution: Preliminary supply, buying climax, automatic reaction, secondary tests, true breakout (fall through the ice), last point of supply.

Sloping Structures

• Up-Sloping Accumulation: Less dramatic springs due to inherent buyer strength.
• Down-Sloping Accumulation: Requires significant spring events due to inherent weakness.
• Up-Sloping Distribution: Hard to spot up thrusts; requires noticing channel breaks.
• Down-Sloping Distribution: Easier to spot up thrusts as minor extensions of the trend.

Trading Strategy

• Phase C (false breakout): Enter at false breakout or test of breakout.
• Phase D (trend inside range): Enter on trend movements or test of breakout.
• Phase E (trend outside range): Continue trend trades until prelim stops appear.

Money Management

• Stop Loss: Place near significant high/low points.
• Take Profit: Trend trade ideally continues until preliminary stops indicate reversal.

Real-World Examples

Distribution Structure Example (Euro USD)

• Preliminary stop with prominent upper tail.
• Climax identified by wide range, high volume candle.
• Divergent subsequent shift confirms up thrust after distribution.
• Price tests levels before breaking support (fall through ice).

Accumulation Structure Example (GBP USD)

• Preliminary support with lower shadow candle.
• Climax marked by wide range bearish candle and high volume.
• Series of secondary tests as lower lows before spring.
• Spring event confirms trend reversal with wide range bullish candle.

Conclusion

• Framework Benefits: Provides a roadmap for understanding market actions and phases.
• Volume Spread Analysis: Primary focus over strictly identifying phases/events.
• Key Strategy: Align trades with well-informed trader actions.