I start a series of posts to guide you on how to boost profits following the Wyckoff method. For those, who don’t know, Richard Demille Wyckoff (1873–1934) is considered to be one of the five ‘fathers’ of technical analysis. I will not stop on his biography – if you want, you can find it on the internet. Instead, I want to explain the basics of his approach.
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The market changes all the time. From my experience, best of all Wyckoff method works for metals and other commodities. At least in the modern market and conditions, we have last few years, despite his main focus being the stock market. Wyckoff’s approach is based on the idea that traders can understand the market through a detailed supply and demand analysis.

That can be ascertained by studying price action, volume, and time. You can see below the scheme of his concept to get it better.

wyckoff method accumulation and distribution
As you see, the best time for going long is an accumulation area, while the ideal time for shorts is at the end of the preparation for price markdown.

Wyckoff Method – Laws

Law of supply and demand 

The Law of supply and demand determines the price direction. This principle is central to Wyckoff’s method of trading and investing. When demand is greater than supply, prices rise, and prices fall when supply is greater than demand. How to identify it? Well – check the volumes in the real market (I mean futures or stocks, not CFDs). This way, you can study the balance between supply and demand by comparing price and volume bars over time.
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Law of cause and effect

The law of cause and effect helps the trader and investor set price objectives by gauging the potential extent of a trend emerging from a trading range. Wyckoff’s “cause” can be measured by the horizontal point count in a point-and-figure chart, while the “effect” is the distance price moves corresponding to the point count. In other words, it can be seen as the force of accumulation or distribution within a trading range — and how this force works itself out in a subsequent upward trend or downward movement.

The law of effort vs result

The law of effort vs result provides an early warning of a possible trend reversal. Likewise, divergences between volume and price often alert about it. For example, when there are several high-volume (great effort) but narrow-range price bars after a substantial rally, with the price failing to make a new high (little or no result), this suggests that big interests are unloading shares in anticipation of a change in trend.
Richard-D-Wyckoff basics of method guide

Best books to learn Wyckoff Method

The Wyckoff Methodology in Depth: How to trade financial markets logically (Trading and Investing Course: Advanced Technical Analysis Book 1). It is a great book to learn the Wyckoff approach – how and why markets move, three fundamental laws, the process of accumulation and distribution, events and phases of the Wyckoff Methodology, etc.

Trades About to Happen: A Modern Adaptation of the Wyckoff Method. Honestly, the book on adapting the classic work of Richard Wyckoff to today’s markets. You will learn how to construct intraday wave charts similar to Wyckoff’s originals, draw support/resistance lines, interpret the struggle for dominance in trading ranges, recognize action signals at turning points, and more.

My Secrets of Day Trading in Stocks. Fantastic guide for day traders from the market legend with many examples and detailed explanations.

Price Action Breakdown: Exclusive Price Action Trading Approach to Financial Markets. This book covers concepts, ideas, and price action trading methods that you most likely haven’t seen elsewhere. The knowledge contained can be used to trade any financial market such as Forex, Futures, Stocks, Commodities, and all major markets.

Charting the Stock Market: The Wyckoff Method. This book guides you step by step through the Wyckoff method: first, the basic principles; second, examples of the technique applied to the bond market; and third, an outline of steps to put the method to use. Details of the Wyckoff method covered in this book include point and figure charting, trends, price and volume studies on vertical charts, stop orders, forecasting, wave charts & intraday, group stock behavior,  stock selection criteria, and much more …

How To Make Money With Wyckoff Method [Full Guide] by Inna Rosputnia

Wishing you a great week!

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