What is the Wyckoff Method ?

The Wyckoff MethodrnWyckoff detailed three basic laws. rn1.The Law of Supply and Demand rnThis was his first and basic law, borne out of his experience as a broker with a detailed inside knowledge of how the markets react to the ongoing battle of price action, minute by minute, and bar by bar. When demand is greater than supply, then prices will rise to meet this demand, and conversely when supply is greater than demand then prices will fall, with the oversupply being absorbed as a result. Consider winter sales! Prices fall and the buyers come in to absorb oversupply. 2.The Law of Cause and Effect rnThe second law states that in order to have an effect, you must first have a cause, and furthermore, the effect will be in direct proportion to the cause. In other words, a small amount of volume activity will only result in a small amount of price action. This law is applied to a number of price bars and will dictate the extent of any subsequent trend. If the cause is large, then the effect will be large as well. If the cause is small, then the effect will also be small. The simplest analogy here is of a wave at sea. A large wave hitting a vessel will see the ship roll violently, whereas a small wave would have little or no effect. 3.The Law of Effort vs Result rnThis is Wyckoff's third law which is similar to Newton's third law of physics. Every action must have an equal and opposite reaction. In other words, the price action on the chart must reflect the volume action below. The two should always be in harmony with one another, with the effort (which is the volume) seen as the result (which is the consequent price action). Stock Homes Institute provides live practical knowledge with money & risk management skills courses from Stock Homesrn