Wyckoff Method
Accumulation and distribution phases
Richard Wyckoff's method studies how institutions accumulate (buy) and distribute (sell) positions.
Accumulation phases (bottom building): 1. Preliminary Support (PS) 2. Selling Climax (SC) 3. Automatic Rally (AR) 4. Secondary Test (ST) 5. Spring (false breakdown — key signal) 6. Sign of Strength (SOS) 7. Last Point of Support (LPS)
Distribution phases (top formation) — mirror image.
The Spring is the most important signal: a false breakdown below support that traps shorts, then price reverses aggressively upward. This is where smart money loads positions.
Wyckoff's three laws: 1. Supply and Demand 2. Cause and Effect 3. Effort vs Result
Pro tip: The Wyckoff Spring on a daily chart with volume confirmation is one of the most reliable reversal signals.
Common mistake: Trying to identify Wyckoff patterns on 5-minute charts. Better: Wyckoff works best on 4H and daily charts where institutional activity is visible.
Key takeaways
- Accumulation = institutions buying (bottom)
- Distribution = institutions selling (top)
- Spring = false breakdown (key signal)
- Three laws: Supply/Demand, Cause/Effect, Effort/Result
Quiz
- A Wyckoff Spring is: Answer: False breakdown below support. Spring = false breakdown designed to trap shorts and allow institutions to accumulate.
Educational content, not financial advice.