Wyckoff’s unique approach to technical analysis has survived into the modern era and still works amazingly. It guides traders and investors on the best ways to pick winning stocks and other assets. Moreover, it helps traders like me and you to identify the most advantageous times to enter the market. So, in this post, I share the best strategies to trade Wyckoff accumulation. But let’s start with the basics.

fixed returns etf 123

I believe you have heard Wyckoff’s Method was originally focused on stocks, but it is now applied to all sorts of financial instruments. And in this post, I will share my insight on how to trade Wyckoff accumulation and get the highest possible accuracy. So, let’s start with the basics.

What is Wyckoff accumulation?

The accumulation is sideways and a range-bound trading period. It usually occurs after a prolonged downtrend. This is the trading zone where big players build long positions and wash out retail traders. They accumulate positions gradually to avoid the price from changing significantly.

How do you tell if a stock or other asset is being accumulated?

Accumulation can last few months or even years. But in most cases, it takes 3 – 6 weeks. It looks like a long period of consolidation during a downtrend. So, you can easily identify it on the chart. Also, the ratio of up days to down days are pretty much equal. Thus, volatility tends to be low due to the lack of interest.

Managed Accounts Inna Rosputnia

Want your money to grow?

See how I can help you to make your money work for you

Managed Investment Accounts – unlock the power of professional asset management. Let me make you money while you enjoy your life.

Stock and Futures Market Research – use my technical and fundamental analysis to pick up swing trades with the best risk/reward ratio.

Trading Course – learn the market structure and proven, time-tested strategies to get high ROI.

Send Request

Best strategies trade Wyckoff accumulation

Range-bound strategy

If it is 200 EMA is flattening out and the price has dropped over the last 3 – 6 months, then identify the highs/lows of the consolidation range. If the price reaches the low of the range and gets rejected, consider longs with a tight stop loss and take profit near the nearest swing high. The opposite works for shorts. However, consolidation can’t last forever. So tights stop loss is a must. The next 2 techniques are valid only for longs.

accumulation wyckoff strategy range bound

Aggressive entry

It is important to pay attention to the fundamental factors that move the market. If the market has a fundamental setup for the rally, there is a big chance Wyckoff accumulation will play very well. So, first, make sure there is a fundamental cause for the run. If yes, aggressive traders can buy after a successful Spring. In other words, a swing failure with significant volume is a signal to go long. The stop loss, in this case, is a bit below the Spring.

Wyckoff accumulation chart aggressive strategy

Conservative entry

Again make sure, there is a fundamental setup for the rally. Then wait till phase D. We need a clear LPS and SOS (explained below). Consider longs if SOS breaks out to the upside. If your equity is very small, put stop loss below the base of SOS. If your equity allows a wider stop, put it below LPS. I like this approach most of all as it gives the best risk/reward. Moreover, the next phase (E) brings the aggressive rally. So, you get profit fast enough compared to the aggressive entry we discussed above.

Reaccumulation strategy

Reaccumulation is the pause in an uptrend that builds the cause for a new rally. It can take weeks, months, and even years to complete. Reaccumulation begins with an acceleration of the uptrend into a Buying Climax (BCLX). A BCLX and an Automatic Reaction (AR) set the resistance and support zones of the new consolidation area. The trendless trading range will discourage many traders and they will sell shares to move on to other more active assets. At the same time, big players use the release and availability of shares to add to their positions.

wyckoff reccumulation

Often traders misinterpret a reaccumulation as distribution. With careful analysis, you can learn to make the essential distinction between these two conditions. Recall that absorption results in reaccumulation or accumulation, and price action becomes ever less volatile as the structure comes to a conclusion and the uptrend begins. This is because most of the available shares have been removed from the market. In the schematic above notice how each of the lows (in the area of support) are higher than the prior low. It is not uncommon for the lowest price of the structure to be on the AR or the following Test. Reaccumulations can also have a Spring at the conclusion.

The best time to trade is SOS. In other words, a breakout above resistance, after Creek and LPS are clearly seen on the chart. The stop loss should be placed below support.

reaccumulation chart wyckoff strategy method

Wyckoff Accumulation Phases

Phase A: 

This phase is a sign previous downtrend has ended and means booking profits and closing of short positions. Up to this point, supply has been dominant. The approaching diminution of supply is evidenced in preliminary support (PS) and a selling climax (SC). Usually, these events can be easy to see on the bar charts, where widening spread and heavy volume depict the transfer of huge numbers of shares from the public to large professional interests. An automatic rally (AR), consisting of both institutional demand for shares as well as short-covering, typically ensues after strong selling pressures.
Next what we see in Phase A is a successful secondary test (ST) in the area of the SC. But ST usually shows less selling than previously and a narrowing of spread and decreased volume, generally stopping at or above the same price level as the SC. ST, AR, and SC create a consolidation zone of the market. Sure, sometimes we can see sharp reversals without consolidation. But now we are trying to figure out a clear indication of downtrend reversal.

Awyckoff accumulation phases

Phase B: 

In Wyckoff’s analysis, phase B serves the function of “building a cause” for a new uptrend. The main sign of this phase is an accumulation of positions by institutions and you can always see open interest in COT reports. The process of accumulation can take from a few weeks to almost a year. But usually, it takes 3 – 6 weeks. the longer it takes the more ST we will see in phase B. Early on in Phase B, the price swings tend to be wide, accompanied by high volume. As the professionals absorb the supply, however, the volume of downswings within the TR tends to diminish. Phase B is the longest phase of accumulation. When it appears that supply is likely to have been exhausted, the market is ready for Phase C.

Phase C: 

This phase takes less time. The main function of this phase is to test the remaining supply, allowing the “smart money” operators to ascertain whether the market is ready to be marked up. Very often you can see the so-called “spring” – it is a price move below the support level of the TR established in phases A and B that quickly reverses and moves back into the RT. In other words, it’s a false breakdown It is an example of a bear trap because the drop below support appears to signal resumption of the downtrend. But you are smart traders and use this high-probability trading opportunity to go long?

D: 

The next what we can see after “spring” is the consistent dominance of demand over supply – SOS. This is evidenced by a pattern of advances (SOSs) on widening price spreads and increasing volume, and reactions (LPSs) on smaller spreads and diminished volumes. The price moves at least to the top of the TR. LPSs in this phase are generally excellent places to initiate or add to profitable long positions.

E: 

In phase E of Wyckoff accumulation, the market leaves the TR, demand is in full control, and the markup is obvious to everyone. Pullbacks are very small during this phase. New, higher-level TRs comprising both profit-taking and acquisition of additional shares (“re-accumulation”) by large operators can occur at any point in phase E. These TRs are sometimes called “stepping stones” on the way to even higher price targets.
A
A

In conclusion

The Wyckoff accumulation is a technical analysis approach.  It helps traders to navigate the financial markets based on the study of the relationship between demand and supply forces. Many well-known investors used his approach, including James Keene, Jesse Livermore, Andrew Carnegie, J.P. Morgan, Jay Gould, and others.

It has been almost a century since its creation, but the Wyckoff Method is still one of the most popular and highly accurate approaches. It includes many principles, theories, and trading techniques.

As result, it allows investors to make more logical decisions rather than acting out of emotions. Moreover, Wyckoff’s approach provides traders and investors a number of tools for reducing risks and increasing their chances of success.

The Best 4 Strategies To Trade Wyckoff Accumulation. Phases and Events by Inna Rosputnia

Wishing you a great week!

Want To Make Your Trading More Profitable?

Subscribe to get free research, trading lessons, and more insights.

(We do not share your data with anybody, and only use it for its intended purpose)