PART 1. ACCUMULATION CYCLE
Wickoff Theory
The Wyckoff theory describes many aspects and rules of trading. The main problem of the theory is the demand/supply balance. It is widely known that this balance is the key reason of some price action on the market. Today we are going to consider the Wickoff Cycle pattern. Let's start with the accumulation one.
WIIckoff Events
Key elements of the theory is the price action, spread and volume. The possible acuumulation cycle Wickoff events are following.
1. Preliminary Support (PS) - price in the downtrend, volume and price spread increase
2. Selling Climax (SC) - price spread is large, all selling volume is absorbed by major investors. Here we can see the long wick bottom
3. Automatic Rally (AR) - when the bearish pressure decreased the bulls became dominant.
4. Secondary Test (ST) - price returns almost to the SC. Used for the bottom confirmation. Volume and spread are much lower than in SC. Can be multiple.
5. Spring - it is optinal event. Occures when the selling pressure is strong but major investors have a greter demand to absorb all this supply
6. Tests - can be multiple. Attempts to re-enter the trading range low. Bullish tests is the less volume with higher lows of the price action
7. Sign of Strength (SOS) - price action along the resistanse usually looks like a triangle or wedge pattern
8. Back-up/Last Point of Support - last low before the uptrend starts
Wyckoff Cycle
Let's consider step-by-step the phases of the Wyckoff cycle.
1. Phase A - the huge downtrend is about to end. We can identify the PS, SC and AR points which form the resistance and support of the trading range.
2. Phase B - price action is in the trading range. The mutiple secondary tests (ST) of the support are possible. During this phase it should be alomost clear that bullish pressure is stronger than bearish.
3. Phase C is optional. There is could be the spring - fake support level breakout, but the price quickly returnes to the trading range forming higher lows.
4. Phase D - the price broke through the resistance and starts consolidate along it.
5. Phase E - massive price pump.
DISCLAMER: Information is provided only for educational purposes. Do your own study before taking any actions or decisions.
Wickoff Theory
The Wyckoff theory describes many aspects and rules of trading. The main problem of the theory is the demand/supply balance. It is widely known that this balance is the key reason of some price action on the market. Today we are going to consider the Wickoff Cycle pattern. Let's start with the accumulation one.
WIIckoff Events
Key elements of the theory is the price action, spread and volume. The possible acuumulation cycle Wickoff events are following.
1. Preliminary Support (PS) - price in the downtrend, volume and price spread increase
2. Selling Climax (SC) - price spread is large, all selling volume is absorbed by major investors. Here we can see the long wick bottom
3. Automatic Rally (AR) - when the bearish pressure decreased the bulls became dominant.
4. Secondary Test (ST) - price returns almost to the SC. Used for the bottom confirmation. Volume and spread are much lower than in SC. Can be multiple.
5. Spring - it is optinal event. Occures when the selling pressure is strong but major investors have a greter demand to absorb all this supply
6. Tests - can be multiple. Attempts to re-enter the trading range low. Bullish tests is the less volume with higher lows of the price action
7. Sign of Strength (SOS) - price action along the resistanse usually looks like a triangle or wedge pattern
8. Back-up/Last Point of Support - last low before the uptrend starts
Wyckoff Cycle
Let's consider step-by-step the phases of the Wyckoff cycle.
1. Phase A - the huge downtrend is about to end. We can identify the PS, SC and AR points which form the resistance and support of the trading range.
2. Phase B - price action is in the trading range. The mutiple secondary tests (ST) of the support are possible. During this phase it should be alomost clear that bullish pressure is stronger than bearish.
3. Phase C is optional. There is could be the spring - fake support level breakout, but the price quickly returnes to the trading range forming higher lows.
4. Phase D - the price broke through the resistance and starts consolidate along it.
5. Phase E - massive price pump.
DISCLAMER: Information is provided only for educational purposes. Do your own study before taking any actions or decisions.
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Wyckoff Events
The distribution cycle has almost the same events
1. Preliminary Supply (PSY) - after a huge uptrend the first significant pullback. volume and price spread increase
2. Buying Climax (BC)- price spread is large, all demand is satisfied by major sellers. Here we can see the long wick top
3. Automatic Rally (AR) - when the bullish pressure decreased the bears became dominant
4. Secondary Test (ST) - price returns almost to the BC . Used for the top confirmation. Volume and spread are much lower than in SC . Can be multiple
5. Sign of Weakness (SOW) - in phase B this is the lower low than AR. In phase D the price action along the support level
6. Upthrust (UT) - the opposite to the springs in the accumulation.
7. Last point of Supply (LPSY) - last high in the SOW in phase D
Wyckoff Cycle
1. Phase A - the uptrend is interrupted by the PSY and AR. During this phase the trading range is formed by AR and BC.
2. Phase B - price action is in the trading range. During this phase it should be alomost clear that bearish pressure is stronger than bullish.
3. Phase C is optional. There is could be the upthrust - fake resistance level breakout, but the price quickly returnes to the trading range forming lower highs.
4. Phase D - the price broke through the support and starts to consolidate along it.
5. Phase E - massive price dump.