THE WYCKOFF METHODOLOGY

"A stock market operator must be as hard-boiled as a five-minute egg; cold-blooded as a fish; deaf to all gossip; blind to news; and dumb as a door knob when it comes to discussing the market with others." - Richard D. Wyckoff

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Wyckoff's goals: to select only stocks that will move Soonest, Fastest and Farthest; to limit Losses and let Profits run; and to make the most efficient use of investment capital. 

Wyckoff realized "it was possible to judge the future course of the market by its own action...that the action of stocks reflected the plans and purposes of those who dominated them...that the basic law of Supply and Demand governed all price changes; that the best indicator of the future course of market was the relation of Supply and Demand."

Keep 2 rules firmly in your mind:​ 

(1) Don't expect the market to behave exactly the same way twice. The market is an artist, not a computer;

(2) Today's market behavior is significant only when it's compared to what the market did yesterday, last week, last month, even last year. Everything the market does today must be compared to what it did before

Wyckoff stated the basics of his method in 5 steps:

(1) Determine the present position and proable future Trend of the Market. Then decide how you are going to play the game: Long, Short or Neutral

(2) Select from those Stocks in harmony with the market: the ones stronger than the market in a bull market, those weaker than the market in a bear market

(3) Select those stocks that have built up a Cause, a potential count for a move in keeping with your goals

(4) Determine each stock's readiness to move

(5) Time your commitments with a Turn in the market

The best time to make a commitment in individual stocks is the point at which we can anticipate a turn in the general market. Learning to anticipate a turn in general market requires an understanding of all 3 of the basic laws of the Wyckoff method:

(1) Supply and Demand;

(2) Cause and Effect;

(3) Efforts vs. Result