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The Wyckoff Method

The Wyckoff Method is an advanced method used by advanced traders. This article and method are not for you newbie traders. Some of our admins use it in their technical analysis. SeansTrades is the most frequent user of the Wyckoff Method on our team.  

Wyckoff Method Background

Richard Demille Wyckoff was a legendary stock market investor and founder of the Magazine of Wall Street. He was so wealthy that he owned nine and a half acres next to the Hamptons estate of General Motors president Alfred Sloan. Click here to see it; it’s a beast of a property. 

His trading method was so successful that he died in 1934, and his approach still guides traders in the best ways to pick profitable stocks, the most advantageous times to buy them, and the most effective risk management techniques.

Why Use The Wyckoff Method

Traders like SeansTrades use the Wyckoff Method to make less emotional, better-informed decisions about when to buy and sell stocks. 

The Basics Of The Wyckoff Method

The Wyckoff Method uses two main rules. 

Rule 1: The market and individual securities never behave in the same way twice.

Rule 2: The significance of price movements reveals itself when compared to past price behavior.

The Wyckoff Method can be broken down into five steps as laid out by Investopedia.com.

"1. Establish the overall market’s current trend and most likely future direction. Assess whether supply and demand indicate that the market is positioning itself to move up or down.

2. Select stocks that follow the same trend. Especially those that show greater strength than the market during upswings and less weakness during downturns.

3. Select stocks that are under accumulation (or in distribution if you’re selling). These stocks have the potential to increase in price to meet and possibly exceed your price objective. 

4. Decide whether a stock is ready to move. Examine the price and volume of your stock and the behavior of the overall market. Be sure that your conclusions are valid and the stock is a good choice before taking a position.

5. Time your trade to take advantage of the larger market’s turns. In general, buy a stock you’ve selected if you determine that the market will reverse and rally. Sell a stock if your analysis indicates that the market will fall."

Why The Wyckoff Method Is Effective

The Wyckoff Method is perfect for assessing markets and time trades. It’s as simple as that. 

For more information and to truly learn the principles of the Wyckoff Method, take a coaching session with one of our admins

Risk Disclaimer: Trading in options involves high levels of risk and may not be suitable for all investors. Before deciding to trade options, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. Additionally, past performance is not necessarily indicative of future results. Please read our full list of risk disclosures here.

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