HOW IT WORKS: Wyckoff’s Method – Master the four market phases

by | Nov 22, 2023

Wyckoff’s Method stands the test of time.

It will always work.

And it is just so logical that it’s easy to understand.

However, it’s also underlooked and most times forgotten.

If you had this method under the belt, you might have probability predicted:

  1. The financial crash

  2. Bitcoins rise and fall and rise again

  3. Stock market bubbles

And more…

Well, I’m happy to be reincarnating this time-tested method.

Which I believe will help with your trading.

Let’s start with a short history lesson.

Where the Wyckoff Method came from

Born in 1873, Dr. Richard Wyckoff began his career as a stockbroker.

He learned and gained firsthand experience in the ebbs and flows of Wall Street.

He spent years studying the behaviors of major market participants, market environments, phases and he observed their maneuvers through market transactions.

His breakthrough came as he studied and delved into the patterns and signals within the price and volume movements.

He realized that this could show the intentions of institutional investors.

And *poof*.

Wyckoff’s Method was discovered.

The Four Phases of Wyckoff’s Method and how it works

    Phase #1: Accumulation (Consolidation)

    The Accumulation or Consolidation phase, occurs after a prolonged downtrend or in a range-bound market.

    During this phase, large institutions, investors and smart money buys the market at lower prices.

    And they are able to keep the market sentiment subdued which continues to move in a sideways manner.

    Phase #2: Markup (Advancing)

    Once traders see the buying interest and demand, this is where they jump in…

    And so the market is poised for a potential uptrend.

    The Markup phase begins as the price starts to rise.

    This phase reflects the transition from a sideways market to a bullish market sentiment.

    During Markup, the market’s price rallies.

    This allows the rest of retail traders to get in and ride the upward trend to maximise profits.

    Phase #3: Distribution

    As the market reaches elevated levels until it hits a peak.

    That’s where the institutional players begin to distribute (sell) their holdings.

    The Distribution phase is characterized by smart money selling their accumulated positions to eager retail investors.

    This is where you’ll see another market phase where you can see a sideways or Twilight Zone range.

    If you’re able to recognize a Distribution phase, it could prepare you for a potential reversal to the downside.

    Phase #4: Markdown (Declining)

    Once Smart Money have sold off their positions, prices then start to decline.

    Retail traders and dumb money jump right in and start selling their assets – which causes a market crash.

    This reversal then enters into a near market.

    You’ll see the price making lower highs and lower lows.

    And that’s when the market will enter into free fall mode.

    It will continue until it hits a bottom. And that’s where the big guys will get right back in.

    And the phases start all over again.

    Now you know what to look out for

    You now have the idea Wyckoff’s Method in your trading arsenal.

    Keep these four phases in your mind

    1. Accumulation

    2. Markup

    3. Distribution

    4. Markdown

    You can use it help identify and spot different market trends, environments and phases with more confidence.

    This can help you to know when to buy, when to sell and when to remain cautious.

    Remember, the charts never lie.

    It’s not about what you feel, but what you see right in front of you.

    So forget the noise, media and hype.

    The clarity will always be there in the charts.

      Trade well, live free.

      Timon Rossolimos
      Founder, MATI Trader

       

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      Timon Rossolimos

      Founder, MATI Trader

       

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