Richard D. Wyckoff is among the legends of stock market trading, and though he lived almost a century back, what he did and what he said is relevant even today. And though Wyckoff’s area of operation was Wall Street, his techniques are very much appropriate for all other stock markets, including the Australian Securities Exchange as well. He started working in the stock market when he was very young and implemented his methods, and eventually, he became extremely rich. He purchased property and was the proud owner of a mansion on nine and a half acres that was next door to where the owner of General Motors’ lived.

 

What Is The Wyckoff Method?

 

Richard D. Wyckoff analysed many of those stocks that were the greatest winners. He also analysed market operations and the operators themselves to arrive at a conclusion about the optimal level of risk taking and reward. The Wyckoff method emphasizes the importance of stop-losses and the need for controlled risk taking, and he also demonstrated a technique using which, the trader could profit within the bull and bear trends.

 

Market Trend And The Wyckoff Method

 

According to Wyckoff, what was most important to watch in the market was the trend. He pointed out that trends can be both long term and short term. And there can be up trends, horizontal trends and down trends too. In other words, the market price of today can be compared with the price in different times such as yesterday, the stock’s price a week or a month back, and it can even go back by six months. He also said that trending needed to depend on the kind of trading a person was doing. For example, if the person was a short term trader, he or she needed to analyse various short term trends over time. This means that two traders can be using the Wyckoff method, but for them, the trending can be different because essentially their stock market objectives are different.

 

Interestingly, the ‘long term’ as defined by the short term trader, actually becomes the ‘short term’ for the trader who is in the stock market for the longer or the intermediate period. And so according to this method, in the market, there is no fixed short, medium or long term. It all depends on who the person is, and what his/her objectives are.

 

Wyckoff also warned traders to be consistent in the trading with the trending they carried out. This means that the person should not analyse the trend in one time frame, and then operate in another. For example, if the trending is in short term, the person needs to invest for the short term, and also implement the stop-losses and the controlled risks.

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