STA Blog

A few weeks ago an email dropped into my inbox talking about this method and saying:

The Wyckoff Method
Richard D. Wyckoff started his trading career in 1888. He was an eternal student of the subject. He was a successful trader and a pioneer of technical analysis. Based on his theories, studies and real life experiences, Wyckoff developed a trading methodology that has stood the test of time. Wyckoff started with a broad market assessment and then drilled down to find securities with the most profit potential.

I have to admit, I didn’t know him or the technique.  Turning first to my trusted technical analysis bible, John J. Murphy’s Technical Analysis of the Futures Markets (1986 edition) there was no mention of him.  So, as most do today, I immediately Googled it.

Trusty Stockcharts.com has a good outline of his five key steps to formulating a trade.  One, determine the probable trend and then choose stocks that are in harmony with it.  Follow up by using point and figure-generated estimates of the stock’s measured target and evaluate whether it’s likely to ‘get a move on’.  Finally use bar charts and other methods to set trailing stops in case the market starts to turn.

http://stockcharts.com/school/doku.php?id=chart_school:market_analysis:the_wyckoff_method

Of greater interest is the article by Hank Pruden in the March 2017 issue of Market Technician (members will have received it online). Following on from the theme of London’s 2014 IFTA conference: Unravelling the DNA of the Market, he believes ‘that Wyckoff and Elliott represent ever more basic structural components of the market.  I further believe that the double-helix framework of DNA is a very useful metaphor for combining Wyckoff and Elliott for better, more profitable market timing decisions’.

Interestingly the method embraces the idea of market professionals, known today as ‘smart money’, fleecing the public (who have a tendency to mass behaviour).  Very much the line of thinking taken by the CFTC and their Commitment of Traders reports and the hedge fund coterie.  Maybe it’s time to muscle in with the big boys!