Wyckoff was proof that a great trader was not born or had mystical powers, but resulted from sound training and hard work. He merged the methods of the great traders of the time into a detailed step by step plan. With no confusion or gaps in explanation that is so common is 'How I trade' books, Wyckoff produced charts, trading results, diaries and full explanations. To best understand wyckoffian logic and methods the following texts are a must read.
annotation tools are excellent for tracking Wyckoffian logic terminology on your favorite stock charts.
Hedging. Money Management
The Law of Supply and Demand
When there is an excess amount of something (supply) the value of that item is reduced to draw in the demand needed to absorb that supply. Or, if there is a scarcity of something, then the value of that item will increase to create the supply that will meet that demand.
SANET - SoftArchive
The Law of Cause and Effect
In order for there to be an effect (change in price), there needs to be a cause. The effect will be in direct proportion to that cause. Best price moves occur when there has been enough time to allow for a period of accumulation or distribution (or in other words a cause).
Wyckoffian logic has found its way into a wide variety of modern day texts, once you read the original source you will clearly uncover adaptations of Richard Wyckoff theories.
Richard Wyckoff also uses the indicator called the Optimism Pessimism Index, this is in fact the modern day On Balance Volume indicator which is also available here. We prefer to use our own proprietary RTT_PriceVolume indicator that highlights the divergence in volume relative to price exceedingly well.
In Tim Ord's book ( The Secret Science of Price and Volume ) he explains how to review volume per price swings and when to be bullish or bearish. We added to this the percentage of the float traded each day and swing. The results are always very interesting when you apply Wyckoff logic to float traded as well as volume. (Note: Stock float data is not provided, we use the data from short )
Wyckoff interviewed many famous traders of his time, this is how he learnt to apply the top down stock selection approach: Select the strongest index, select the strongest sectors within the index, select the strongest stocks within the sector (strength was measured on an alpha basis or relative strength). The Alpha Stock Scanner makes this task a breeze.
Other site tools like the percentage trailing stop can help monitor the momentum as alert the chart reader to changes in behaviour that resemble 'Signs of Strength' or 'Signs of Weakness' that change momentum.
Viewing price and volume action on a daily, weekly and monthly charts are the norm. We find favor with viewing price and volume action with Half Month charts ( that is start of month to the 65th, then 65th to end of the month) , we see these as just right for a wider view of the price action. And yes we can do quarterly as well, just for fun.