I don’t usually post on weekends. But it’s Xmas so think of this as my Christmas present to you for your support. Merry Christmas and Thanks!
In this post I’ll conclude the Wyckoff series and suggest source materials in case you’d like to take your studies to another level.
Like Steidlmayer, Wyckoff’s work evolved over time – from his early days as a tape reader to the technical trader by the time of his death. Throughout his career there was one constant: principles mattered over patterns. Understand the principle, and you can adjust the pattern. As they say, history repeats itself but…never repeats in exactly the same way.
By the end of his career, Wyckoff had three main principles:
- The Law of Supply & Demand
- The Law of Cause & Effect
- The Law of Effort and Result
Rather than have my take on what Wyckoff meant, read the information straight from the horse’s mouth. You can download the first 5 pages of the “Introduction to the Wyckoff Method of Stock Market Analysis” (published by the Stock Market Institute and including the charts) at http://www.tradingsuccess.com
Principles are crucial to success. But to learn to apply the principles, we need a model of application. So, by the time of his death, Wyckoff had also developed a model for trading changes in trend and trading continuation trades.
The best source of this model is the Stock Market Insitute in Arizona. The good news is they finally have a web site: http://wyckoffstockmarketinstitute.com/. The bad news is they no longer seem to carry the ‘Introduction to the Wyckoff Method of Stock Market Analysis’. Futures and FX traders needed only the Introduction; stock traders/investors would find the full course useful. It would certainly pay futures and FX traders to ask SMI if they still have the “Introduction….” for sale. If you do learn the model, always keep in mind Wyckoff’s comments about the importance of principles. Without understanding them, the model cannot be adapted when the trading environment changes.
- There is an excellent but incomplete summary in: The Three Skills of Top Trading: Behavioral Systems Building, Pattern Recognition, and Mental State Management (Wiley Trading) by Hank Pruden
- This book contains no theoretical explanations but contains some great practical applications: Timing the Trade: How Price and Volume Move Markets! by Tom O’Brien
- Stocks and Commodities has a series of articles by different authors. Go to the bookstore and search for Wyckoff: http://traders.com/
Tomorrow I’ll review the S&P recommendation I made on Friday.