Markets Through The Eyes of Wyckoff

MARKETS THROUGH THE EYES OF
WYCKOFF
On the basis of Richard Wyckoff Study
INTRODUCTION TO MARKET STRUCTURE
Trading is Contextual & the ‘CONTEXT’ is always the Market Structure.

Every Trading decision is Contextual. Then Market structure becomes the basis
of any trading system/setup.
There are very critical points/value area/levels on the charts where the
structure of market changes. These value areas are very important on the
charts which are known as Confluence points.
We have to construct a story on the charts and this exactly what the context is.
Hence, it is the contextual decision making meaning against Market’s
structure.
SIMPLE SPECIFICATION ON MARKET STRUCTURE
Points to remember while analyzing :
• You must learn how to read structure of charts before you learn
anything else. This is the most important basis of Trading.
• Market Structure is formed in same or different patterns at every
timeframe be it Bigger TF or Smaller TF (like Intraday).
• Some kind of flow will always occur in every Time frame.
• Its most important to understand that, one has to follow the TOP
down approach as always.
• Markets have some special Memory Crest, which becomes the major
turning points of the past.
BAR CHARTS
TRENDLINES
• Horizontal Support & Resistance
• Simple Trendlines
> Demand Lines
> Supply Lines
• Trend Channels
• Reverse Use of Trendlines
• Confluence of Trendlines
Points to remember while marking TLs :
• Horizontal TLs are marked near the major Support & Resistance
levels.
• In an Uptrend, we will always draw DEMAND line first. (as Buying
pressure is in control )
• In a downtrend, we will always draw SUPPLY line first. ( as Selling
pressure is in control )
So with the help of these Supply & Demand lines , we are able to draw
the 2 Trend channels, i.e .
>> Downtrend Channel.
>> Uptrend Channel.
While markings Support/resistance lines, trendlines, and parallel channels demands Open-mindedness.
One must consider other possibilities also. Hence , we get ready for the story on the charts.
WAVES
• The most important thing to know about the markets is the TREND.
You must always be on the lookout for a change in the immediate
trend. This is how you may detect the early change in a Trend.
• In an Uptrend : when the Selling waves begin to increase in time and
distance or the Buying wave shortens. Either or both may be an
indication of a change in the immediate Trend.
• In a Downtrend : when the Buying waves starts to increase with time
and distance or the Selling wave shortens. This may indicate the
reversal in an ongoing trend.
This will show the change of Behaviour in the story of the Charts.
SPRINGS
• Wyckoff always said that one can make a living by trading SPRINGs &
Upthrusts. As once you become attuned to the behavior of a spring(or
upthrust), your eyes will be opened to an action signal that will work in all
the time periods.
• A SPRING is a washout(penetration) of a trading range or support level that
fails to follow through and leads to an upward reversal.
• When a market breaks below a well defined support area and fails to
follow through and rallies back to close on or near its High or well above
the support, I consider it to be in a “ potential spring position”
• The lack of follow through raises the possibility of an upward reversal or a
Spring.
• Springs in an uptrend have a higher percentage of success and are highly
reliable when a trend change is clearly underway.
• Volumes on the Spring should be substantially low than the volume where
support first occurred and it often fails in Downtrend.
UPTHRUSTS
• When an asset moves above the previous line of Resistance and
fails to follow through, one has to consider the potential for a
downtrend reversal. Such a failed breakout (trap) is known as
Upthrust.
• Its more difficult to trade upthrusts than springs.
• Prices rallies up above the Resistance and then fall back below it
and closes near its lows.
• Upthrust is seen when a little weakness is seen in the
background and also requires an old tops in the background.
• Upthrusts can occur on any chart regardless of the time period.
2 BAR BOTTOM/TOP REVERSAL
• 2 Bar bottom reversal occurs at the End of a Trend, uptrend or
downtrend. Also called Pipe formation.
• FIRST Bar : A down/up bar with the closes near the lows/highs.
• Second Bar : An up/down bar that dips below the first bar, rallies on
wide spread ,rapidly reverses & closes at the high/low of the first bar.
• Typical to see high volume on both bars.
• When in Downtrend – Demand has to show up.
• When in Uptrend – Supply has to show up.
• Failure rates are in the range of 5%. If the earlier pattern is lengthy,
the pattern rarely fails.
THANKYOU!

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What is market structure and why is it important to understand?

What are some important elements that make up market structure?

MARKETS THROUGH THE EYES OF

INTRODUCTION TO MARKET STRUCTURE

Trading is Contextual & the ‘CONTEXT’ is always the Market Structure.

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