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RICHARD WYCKOFF – A GENIUS TRADER


“The core concept here is that chart patterns have very limited utility, and what predictive power they do have is highly dependent on where they appear. Wyckoff believed, real purpose of Technical analysis is to define the buying and selling pressure in the market.”

Richard Wyckoff– One of the few legendary names in Wallstreet. Pretty much most of the traders associate him with VSA analysis or Tape reading. But the fact is Richard Wyckoff is one of the god fathers of Price action analysis and the first trader to combine market structure with price movement. During his days, Richard Wyckoff was primarily known as stock market authority, founder and onetime editor of the Magazine of Wall Street (founding it in 1907), and editor of Stock Market Technique


EARLY DAYS OF RICHARD WYCKOFF

Richard Wyckoff began his Wall Street career in 1888 (when he was 15 yrs old) as a stock runner, Wyckoff learned to trade by watching the action first hand. His first trade occurred in 1897 when he bought one share of St. Louis & San Francisco common stock. After successfully trading his own account several years (around 25 yrs), he opened a brokerage house and started publishing research in 1909. Wyckoff implemented his own methods in financial markets, and grew his account such that he eventually owned nine and a half acres and a mansion. His wealth and income history stands tall as a proof, that he is a successful market player. It is also an example of how a normal trader can make it to the top in this business. As Wyckoff became wealthier, he also became an instructor about the public’s Wall Street experience. He turned his attention and passion to education, teaching.


TRADING STYLE

Richard Wyckoff developed his understanding of markets and the trading process through conversations and interviews with master traders of his time. After a consistent period of success, he laid out his system in a set of courses, to educate the public. Referring to these courses as Wyckoff method such as VSA and Tape reading is a misunderstanding, He offered no simple system or one way to trade.

Rather, Wyckoff created a method for understanding the buying and selling convictions of very large traders and institutions through the patterns their activity left on prices. If the small trader could recognize the signs they left in the market, he could align his positions with their activity and interests; in the end, it is the buying and selling pressure of these large pools of money that actually moves the markets. This was a serious discovery during his period. Since most of the stock market instructors such as Gann, Ralph nelson Elliot – all were preaching about patterns and cycles, which were similar to astrology and Fictions. Richard Wyckoff took a different path altogether and his methods were based on pure and simple Logic of Market action- reaction.

Richard wyckoff Price action trading india


TWO SCHOOLS OF TECHNICAL ANALYSIS

There are two broad schools of thought in technical analysis. One approach is to track every possible chart pattern and variation of those patterns. A trader using this approach might look for wedges, pennants, flags, boxes, ledges, head and shoulders patterns, and double tops and bottoms—these are only a few of the traditional patterns, and many more have worked their way into modern practice. These traders spend a lot of time studying these patterns and variations, and they usually have specific trading plans for each pattern. Later, Edwards teamed up with John Magee, and the two wrote Technical Analysis of Stock Trends which is now considered as a source on chart patterns.

The second school of technical analysis is Richard Wyckoff’s approach. The core concept here is that chart patterns have very limited utility, and what predictive power they do have is highly dependent on where they appear. Wyckoff believed, real purpose of Technical analysis is to define the buying and selling pressure in the market. Many traders during his time found a richness and depth in the Wyckoff, an approach that surpassed the simplistic focus on chart patterns.


A CLEAR CONCEPT OF WYCKOFFIAN METHODOLOGY


Wyckoff Trading style

Wyckoff’s technique claimed many common characteristics among the winning stocks of his 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 always, the importance of controlling the risk of any particular trade, and he demonstrated techniques used to campaign within the large trend (bullish and bearish). Simply, Wyckoff felt that an experienced trader should regard the story that appears on the price action as a reflection of a single mind. He felt that it was an important psychological and tactical advantage to stay in harmony with price action.

As per Richard Wyckoff – To be a successful trader you need to understand the market’s mind through price action. By doing so, would lead us to be a profitable trader.

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About the Author:

Balaji is a Speculator, Investor and Trader (All in All!!!) and self published author. Trading in the Markets since decade, have seen more ups and downs along with institutional trader's lifestyle. He usually trades Nifty, Bank Nifty, Commodities, Futures cum Options around both Indian and global Markets. Balaji applies highly analytical and systematic Price Action strategies He blogs passionately about Trading strategies, Price Action Trading, Technical analysis, Macro events, Market setups, Financial and Economical topics. Apart from Trading and Blogging, Balaji also mentors aspiring Traders and Investors on becoming successful in highly competitive financial Markets.

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