The Wyckoff Method
In this free ebook you are going to learn more about my view on the Wyckoff method & how I apply
this daily in my trading. Everyone is teaching the Wyckoff method these days and there are a lot of
misconceptions. In this ebook you will learn:
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The most important phases to identify
The best entry spots
How to apply Wyckoff correctly
Forming a bias
This book will be filled with examples & clear rules. This makes it easy to apply and test this
method.
About the author:
My name is Cas Daamen, I’m from the Netherlands and I have been using the Wyckoff method for
around 5 years. I use it actively in swingtrading the spot FX market, but I also use it to invest in
different assets, such as equities & metals.
I run my own company, called CDFX Trading.
With my company I help people to develop their own mechanical
trading edge so that they can profit from trading various markets.
I focus on personal attention. No bullshit course, but the ability to
ask questions & have personal conversations.
I also help people with investing in different assets, so that they
can invest, grow their money and don’t need to pay a bank to do
so.
Next to that, I run a YouTube channel and recently made a
Free & special Forex Training.
Disclaimer
Trading carries a high level of risk. You can potentially lose all your money if you are not
prepared. Do not trade with money you cannot afford to lose. You should be aware of all
the risk regarding trading. The information in this ebook is for informational purposes only.
The information is not any form of investment advice to be relied upon by users. Trade at
your own discretion. Past performance does not guarantee future performance. I am not a
financial advisor.
Market Phases
Source: https://steemit.com/wyckoff/@esq.monegasque/the-wyckoff-method-for-crypto-beginnerspt-1
This is how any market works. It’s all about supply & demand. Not about trendlines, or other bullshit,
but supply and demand. Imbalances cause prices to move. A market consists of trending moves and
ranges. These are the 4 types of ranges in any market:
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Accumulation
Reaccumulation
Distribution
Redistribution
These are the types of ranges you will see. Knowing how to identify these phases can help you to
establish a bias and trade in line with the bigger players. You have to realize that we as retail traders
can buy at any single moment in time, without problems. Big traders, really really big traders, can’t.
If they would buy 1m lots long at a certain price, and there are only 0,5m shorts, only half of his
order gets filled at that price. The other half gets filled at a higher price, creating slippage & a
drawdown. To prevent this, the bigger player, or composite operator, generates liquidity & scales in
his orders, basically dividing a big order in small pieces.
Accumulation
Accumulation is the range that establishes at the beginning of an uptrend. This range consists of
different phases:
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Phase A
Phase B
Phase C
Phase D
Phase E
Every phase has it’s own characteristics. It’s not really that important to be able to analyze every
single phase in dept, but you have to be able to know why these phases happen and you need to
know how to identify them.
Source:
https://school.stockcharts.com/lib/exe/detail.php?id=market_analysis%3Athe_wyckoff_method&me
dia=market_analysis:the_wyckoff_method:wyckoffaccumulation.png
Phase A of accumulation is all about “stopping action”. This phase can be identified by strong moves
to the downside. The stronger a move to the downside in a downtrend, the more likely it is to end.
Momentum doesn’t indicate force. People think the trend is accelerating and want to hop in when
they see strong moves, this is exactly when the selling climax happens. After the selling climax comes
the AR, this one usually coincides with a “change of character”. This means the retracement to the
upside, that happens after the SC, is bigger and more aggressive than any other retracement during
the downtrend. These are the most important points about phase A.
Phase B of accumulation is all about scaling in orders & generating liquidity. The composite operator
is scaling in parts of his order and building a large position. During this phase you will often see small
up and down movements, this is where the real range forms. Ideally, you don’t want to see any
breaks of the high and low end of the range. The boundaries of a range are often established by the
low of the SC and the high of the AR.
Phase C is where you want to see a false breakout, a spring, manipulation, whatever you want to call
it. This is where weak hands are being shaken out. This is where liquidity is being absorbed. During
accumulation weak hands will be going long, placing a stop below the range. You will also have
people selling below the range, when the range breaks. So basically, a lot of selling. If then, price
triggers these orders below the range and quickly moves back into the range, you know something is
up. There is a lot of selling, but price moves up. This is a successful spring and this is one of the most
important parts.
Phase D is where you want to see massive strength and another change of character. You want to
see a strong move to the upside of the range, breaking out of it and holding. This is exactly where I
enter. The risk reward is a bit less than with spring entries, but the winrate is way higher.
Phase E is a new established uptrend. This is where you will see reaccumulation.
Reaccumulation
During reaccumulation, basically the same thing happens that happens during an accumulation
phase. Reaccumulation looks a lot like distribution, but the main differences are the changes of
character. By analyzing liquidity and how price reacts once liquidity gets triggered, you can make a
distinction between reaccumulation and distribution.
This is clean reaccumulation. Equal lows forming, meaning liquidity will be below those lows. The
lows get broken and price quickly moves back into the ranges, breaking the blue box showing a sign
of strength. It is at this point that you know this is reaccumulation instead of distribution. Of course,
you might get it wrong sometimes, in trading nothing is certain.
Most important points
Now, how can you actually trade this? The most important points about accumulation in my opinion
are:
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Clear SC
Clear change of character
Analyzing liquidity & watching price behavior after liquidity gets triggered
Spring
Break of structure
These are the most important points about accumulation & reaccumulation. By studying these
points on a chart, taking notes and making print screens, you can learn how you can identify these
and add it to your trading plan.
Distribution
Distribution is basically the exact opposite of accumulation. During distribution profit gets taken on
longs after a sustained & aggressive move to the upside. After that, shorts are being scaled in, until a
UTAD happens and price goes down.
Source: https://school.stockcharts.com/doku.php?id=market_analysis:the_wyckoff_method
Now, I can go over all the theory behind it, but that would be a waste of my time and your time.
Think about this as the inverted version of accumulation. It happens at the end of an uptrend. All the
phases are basically the same as the phases during accumulation. You have Phase A stopping action
and a change of character, phase B with slower moves that form a range, Phase C where liquidity
above the range gets taken & absorbed and a phase D with aggressive moves to the downside,
eventually breaking the range and forming a new downtrend, which is Phase E.
The only thing to remember, is that a distribution range is often more aggressive, this means
breakouts tend to move without much retests.
Redistribution is the exact same and happens during an established downtrend. This is usually where
people start buying double bottoms, when in reality price is redistributing and ready for another
move down.
As you can see, a clear double bottom is forming. People think this is a strong support, go long and
put stops below. People will also be buying a breakout at the spot of the UTAD. This is where there is
lots of buying liquidity that’s being absorbed by the composite operator. You see a strong move to
the downside of the range and breaking out. Redistribution confirmed.
Most important points
Now, how can you actually trade this? The most important points about distribution in my opinion
are:
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Clear BC
Clear change of character
Analyzing liquidity & watching price behavior after liquidity gets triggered
UTAD
Break of structure
These are the most important points about distribution & redistribution. As you can see, these are
the same points as the ones I pay attention to during accumulation.
Bias
Let’s go into more practical information. How can we use the Wyckoff method effectively? I
personally use this method in investing & trading. Wyckoff gives me a bias and gives me a clear point
of where I’m wrong on a trade. Let’s say you see a confirmed accumulation range on the daily
timeframe, this means the bias for the coming days/weeks is long. You can then go to the lower
timeframes to find high probability entries. The same goes for distribution. This is how I called the
top in Bitcoin.
Clean BC in Phase A, followed by a bigger and stonger retracement to the downside than any other
retracement. This is a clear change of character. Then we got the UT, breaking the BC. After the UT
price started ranging slowly, generating liquidity above the UT. At this point retail traders were all
crazy about Bitcoin and buying. Sentiment lined up with the distribution forming. After the UTAD we
got a strong move to the downside, breaking structure. This is distribution confirmed. While
everyone was buying the dip, I knew this was distribution so guess what? I had a short bias for the
coming weeks.
So, using this method you can get a long-term bias and then invest, or trade, in that direction. By
going on lower timeframes you can increase your average R, while still getting high odds.
Now, during the second range in Bitcoin people were all talking about accumulation, buying dips and
that stuff. I wasn’t. You see, the longer a distribution range, the longer the duration of the
downtrend. This means that after 1 sharp drop, the downtrend has only started. The range following
this drop is expected to be redistribution. See the chart below for reasons why this was clear
redistribution, instead of accumulation.
Double bottoms rarely hold. As you can see there was a clear double bottom at the lower end of the
range, this means there is liquidity at this spot. At the top of the range, there is also liquidity. This
liquidity got taken, meaning early buyers got fucked. The liquidity has been absorbed and we have
seen a clean move to the downside. As soon as the blue box breaks and closes below, that’s very
important, then you can call it redistribution. If however, there is a spike below the blue box and a
clean break back into the range, I always stay on the sidelines. You have to be able to distinguish a
real break and a false break. This can be easily done by looking at closes.
Entry spots
How can you actually use this method to enter trades? In my opinion, there are two entry points.
The first one is in phase C, so after a confirmed spring. The second one is after the real breakout, so
in Phase D. Where you enter, is totally up to you and depends on your personality. The entry in
phase D has a higher winrate, in general, while the entry in phase C has a lower winrate, but a higher
average R. Which one do you prefer? Can you cope well with losses? It’s important that you know
which way of trading this method is best for you and that you test out which way of entering is the
most profitable. I have sheets filled with data that tell me when the best time to enter is and what
the probability of success is. See the picture below.
So, once you are finished with this ebook, start developing rules and start testing to gather statistics.
This way you know what works best and you know how you should apply this method.
Chart examples
To make the way I use the Wyckoff method in trading a bit clearer, here are some examples of
trades I took.
The lower green line is my stop, the upper green line is my target, the red line is my entry point. This
was a long trade and according to my statistics there was a 71% chance of hitting target when
entering at phase D. My target was at 1.05R. People always want to make you believe that your
target should be a minimum of 3R. This is 100% bullshit. It’s all about expectancy. If you make 1R
everytime you win and lose 1R everytime you lose, but you win 71% of the time, you can bet your
ass you are going to make a lot of money in the long run.
Now, this was a clear reaccumulation range. It would have been better if the spring took out the
lowest low in the range, but this was also clean. Why? Look at the white line. This line marks 2
unbroken lows. Price then breaks these lows and quickly rejects, it even tests again and quickly
moves up. As soon as the blue box breaks, we have a sign of strength and the accumulation is in
phase D. This is where I entered. Stoploss is at the lower green line because this is where I would be
wrong on my trade. Sometimes it will be below the spring, like in this case, but sometimes I can get
it tighter, based on structure, to increase my R:R ratio.
#2nd example
Let’s give you another example. This is a long trade in the USDCAD. I went long at the red line, target
at the upper green line and stop at the lower green line. According to my statistics, based on the
past 10 years of data, if I enter at the red line with this stop and target, I have a 68% chance of
making 1.25R, which is a great setup with a nice positive expectancy. Again, only 1.25R but I win a lot
and lose less often. People that promote 1:200R trades are losing traders and cunts. The only want 1
thing, your money. Don’t believe them.
During the PS, you can see a clear change of character. This is what grabs my attention and this is
when I patiently wait for a range to form. We then get the SC, again aggressive buying after a strong
down move. After that, we get a very clear phase B, followed by a quick and aggressive spring. As
soon as price breaks above the blue line, we enter phase D and I look for an entry. This time, the
stop is higher than the spring, because it’s below structure. It’s below that last red candle, or
demand zone. If price breaks that, 95% of the times your stop below the spring will be hit.
Establishing rules
How you take your profits, how you enter, where your targets are, how you manage your trades,
how you put your stoploss, that’s all up to you. I always enter after a confirmed accumulation or
distribution, that is, in phase D. This is the safest spot to enter, but it also offers a lower average R.
Let’s break it down:
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Phase C = higher average R, higher risk & lower winrate
Phase D = lower average R, lower risk & higher winrate
Nothing is right or wrong. Find what you like, establish rules and start testing. Test different targets,
for example 1,2,3 ATR. Test different stoplosses, such as a stoploss below the spring, or below an lps.
See what works best and gather statistics.
Try different management techniques. I never manage my trades, but maybe it works for you.
I also use the Wyckoff Method for investing in assets for the long run. I enter at phase D, look at
fundamentals and hold for the long run. It’s very successful and I have made great returns with it,
such as an over 15% gain in around 6 months, entering platinum.
Recap
You now know how I use the Wyckoff method in trading and investing. You have clear examples,
know where to enter, what the most important points are. It’s up to you to start making rules and
start testing this method. If you don’t take the time to start testing, you will not be able to make
money trading this method. So don’t postpone it, but take action now. Otherwise, years pass by and
you are still losing money.
I hope you learned what you wanted to learn. If you have any questions, feel free to contact me.
If you want to know more about my 1-on-1 coaching, click here.
If you want to fix your trading, click here.
Good luck on your trading journey!
Cas Daamen
CDFX Trading