Richard Demille Wyckoff (November 2, 1873 – March 19, 1934) was a stock market authority, founder and onetime editor of the Magazine of Wall Street, and editor of Stock Market Technique. Wyckoff’s research claimed many common characteristics among the greatest winning stocks and market campaigners of the time. He analyzed these market operators and their operations, and determined where risk and reward were optimal for trading. He emphasized the placement of stop-losses at all times, the importance of controlling the risk of any particular trade, and he demonstrated techniques used to campaign within the large trend.
The Wyckoff Method is a school of thought in technical Market analysis that necessitates judgment. Although the Wyckoff Method is not a mechanical system per se, nevertheless high reward/low risk opportunities can be routinely and systematically based on what Wyckoff identified as three fundamental laws:
Three fundamental laws:
The Law of Supply and Demand – states that when demand is greater than supply, prices will rise, and when supply is greater than demand, prices will fall. Here the analyst studies the relationship between supply vs. demand using price and volume over time as found on a barchar
The Law of Effort vs. Results – divergences and disharmonies between volume and price often presage a change in the direction of the price trend. The Wyckoff “Optimism vs. Pessimism” index is an on-balanced-volume type indicator helpful for identifying accumulation vs. distribution and gauging effort
The Law of Cause and Effect – postulates that in order to have an effect on you must first have a cause, and that effect will be in proportion to the cause. This law’s operation can be seen working as the force of accumulation or distribution within a trading range works itself out in the subsequent move out of that trading range. Point and figure chart counts can be used to measure this cause and project the extent of its effect