$VANA Fundamental Principles of the Wyckoff Method:
Law of Supply and Demand: Price movements are determined by the balance between supply and demand. When demand exceeds supply, prices tend to rise; when supply exceeds demand, prices tend to fall.
Law of Cause and Effect: Significant price movements (effects) result from periods of preparation (causes), such as accumulation or distribution phases. Wyckoff used point-and-figure charts to estimate price targets based on these phases.
Law of Effort vs. Result: Divergences between trading volume (effort) and corresponding price movement (result) can indicate possible trend reversals or continuations.
Market Cycle Phases According to Wyckoff:
Accumulation: Period in which institutional investors gradually purchase large quantities of an asset, preparing for a rise in prices.
Mark-Up: After accumulation, the price starts to rise due to increased demand.
Distribution: Institutional investors begin to sell their positions gradually, anticipating a decline in prices.
Mark-Down: After distribution, the price starts to fall due to increased supply.
Practical Application:
The Wyckoff method helps investors and traders identify entry and exit points, as well as profit-taking in the market, by observing price and volume patterns that indicate accumulation or distribution phases. By understanding these phases, it is possible to align trades, increasing the chances of success.
