Wyckoff Distribution Pattern in Bitcoin
My friends
In my previous Bitcoin post, I suggested that Bitcoin is in a Wyckoff distribution pattern.
IMO, Wyckoff accumulation and distribution patterns are common in Bitcoin’s PA. I want to highlight similar distribution schematics I noticed in the last bear market.
I also provided a glossary of the terms used by Wyckoff traders. I used two books as sources (citations at the bottom), but the words and phrasing are mine.
I posted this TV idea as educational content. Nevertheless, I do not presume to “educate” you. Consider this as a suggestion by a fellow trader looking for your thoughts and feedback. So, what do you think? Are we on to something here? Yes, or no?
Bitcoin Distribution Pattern June14th– July 24th, 2023:
Bitcoin Redistribution June 18th – August 19th, 2022
Bitcoin Redistribution Pattern January19th – May 3rd, 2022:
Bitcoin Distribution October 6th – December 1st, 2021:
Glossary:
Automatic Reaction (AR): With the buying pressure exhausted, the price moves down sharply. This is called an Automatic Reaction. The low of this sell-off is the range low.
Buying Climax (BC): The point at which buying pressure reaches a climax. By this stage, institutional players (whales) and informed traders sold their allotted stocks to uninformed traders. From this point on, institutional traders begin to suppress the asset's price, preventing it from surpassing a set threshold.
Last point of Supply (LPSY): After breaking below resistance, the Price tries to rally above the former support, now flipped to resistance. Volume may be light or heavy, showing weak demand or substantial supply. At LPSYs, the last waves of distribution are being unloaded before markdown is to begin. LPSYs are good places to initiate a short position or to add to already existing short positions.
Preliminary Supply (PSY): The term describes a stage in an uptrend in which selling pressure creates noticeable resistance after a move up.
Secondary Test (ST): The price moves to the vicinity of the range high to test the supply and demand balance at this price level. If this is really the range-high, supply will outweigh demand, and volume and spread should be diminished as the price moves closer to the resistance area of the range high.
Sign of weakness (SoW): A Sign of Weakness is evidence that Supply is stronger than demand. A breakdown below a support level within the range (such as the mid-range) provides evidence that the MM favors lower prices. A failure to get back above support provides additional confluence to the bearish bias.
Upthrust (UT): An upthrust is a false breakout also called a “bull trap.” The MM initiates a break above the range high to trap breakout traders to go long. The upthrust also shakes out weak hands that already took a short position. The liquidity provided by the breakout traders and from triggering the sell stops of the weak-handed traders gives the MM the liquidity he requires to fill his short positions to trigger the downtrend.
Upthrust After Distribution (UTAD): This is the final shakeout. The basics of the UTAD are the same as the regular UT. Sometimes the UTAD reaches a higher price point than the previous UT actions.
Bibliography
Chaves, R. V. (2022). The Wyckoff Methodology in Depth.
Pruden, H. (2007). The Three Skills of Top Trading. New Jersey: John Wiley & Sons.
In my previous Bitcoin post, I suggested that Bitcoin is in a Wyckoff distribution pattern.
IMO, Wyckoff accumulation and distribution patterns are common in Bitcoin’s PA. I want to highlight similar distribution schematics I noticed in the last bear market.
I also provided a glossary of the terms used by Wyckoff traders. I used two books as sources (citations at the bottom), but the words and phrasing are mine.
I posted this TV idea as educational content. Nevertheless, I do not presume to “educate” you. Consider this as a suggestion by a fellow trader looking for your thoughts and feedback. So, what do you think? Are we on to something here? Yes, or no?
Bitcoin Distribution Pattern June14th– July 24th, 2023:
Bitcoin Redistribution June 18th – August 19th, 2022
Bitcoin Redistribution Pattern January19th – May 3rd, 2022:
Bitcoin Distribution October 6th – December 1st, 2021:
Glossary:
Automatic Reaction (AR): With the buying pressure exhausted, the price moves down sharply. This is called an Automatic Reaction. The low of this sell-off is the range low.
Buying Climax (BC): The point at which buying pressure reaches a climax. By this stage, institutional players (whales) and informed traders sold their allotted stocks to uninformed traders. From this point on, institutional traders begin to suppress the asset's price, preventing it from surpassing a set threshold.
Last point of Supply (LPSY): After breaking below resistance, the Price tries to rally above the former support, now flipped to resistance. Volume may be light or heavy, showing weak demand or substantial supply. At LPSYs, the last waves of distribution are being unloaded before markdown is to begin. LPSYs are good places to initiate a short position or to add to already existing short positions.
Preliminary Supply (PSY): The term describes a stage in an uptrend in which selling pressure creates noticeable resistance after a move up.
Secondary Test (ST): The price moves to the vicinity of the range high to test the supply and demand balance at this price level. If this is really the range-high, supply will outweigh demand, and volume and spread should be diminished as the price moves closer to the resistance area of the range high.
Sign of weakness (SoW): A Sign of Weakness is evidence that Supply is stronger than demand. A breakdown below a support level within the range (such as the mid-range) provides evidence that the MM favors lower prices. A failure to get back above support provides additional confluence to the bearish bias.
Upthrust (UT): An upthrust is a false breakout also called a “bull trap.” The MM initiates a break above the range high to trap breakout traders to go long. The upthrust also shakes out weak hands that already took a short position. The liquidity provided by the breakout traders and from triggering the sell stops of the weak-handed traders gives the MM the liquidity he requires to fill his short positions to trigger the downtrend.
Upthrust After Distribution (UTAD): This is the final shakeout. The basics of the UTAD are the same as the regular UT. Sometimes the UTAD reaches a higher price point than the previous UT actions.
Bibliography
Chaves, R. V. (2022). The Wyckoff Methodology in Depth.
Pruden, H. (2007). The Three Skills of Top Trading. New Jersey: John Wiley & Sons.
