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WYCKOFF IMPORTANT POINTS

SUBMITTED BY MIKE ELLIS

Wyckoff Important Points

Confidential

Page 1
For use by those Pisces Members who have purchased the Wyckoff Course from SMI.

10/4/13

WYCKOFF IMPORTANT POINTS

SECTION 1
1. Richard I. Wyckoff, through long experience, developed a method of judging the stock market by its own action. 2. A speculator uses intelligent foresight in buying or selling stocks. To sell or buy stocks otherwise is gambling. 3. You must learn to determine the position and probable future trend of the market. To do this, you must learn the Wyckoff principles then devote time to applying them in your market operations. 4. 1hroughout this course we will help you to develop independent judgment and selfdiscipline so as to become an intelligent, scientific and successful trader and investor. 5. An important point to learn early is that when in doubt - do nothing. Wait and see. 6. By conscientious application of the Wyckoff principles. you should strive to be right most of the time - but realizing that many times you are going to be wrong. 7. Plan your own stock market activities like you would any campaign. 8. The Wyckoff Method of trading in stocks is a logical five-step approach to stock market investing/speculating. 9. The Pre-Trade Analysis Record is a check-list which should be used prior to making any decision to trade.

10. The Performance Game is practice trading experience in a simulated real-life market
situation.

Confidential

Page 2
For use by those Pisces Members who have purchased the Wyckoff Course from SMI.

10/4/13

WYCKOFF IMPORTANT POINTS

SECTION 2
1. The future course of the market may be judged by its own action. 2. The action of stocks reflects the effect of the forces which dominate them. 3. Volume of stock changing hands in each transaction is important. 4. The Law of Supply and Demand governs all price changes. a. when demand is greater than supply prices rise. b. when supply is greater than demand prices decline. 5. The trend (up or down) is the line of least resistance. 6. Minor and major turning points and points where the price breaks through the opposition are the critical moments in all phases of the market. 7. In the market it is most important to operate with the proper principles. 8. The Trend Letter" was published in 1911 by Richard D. Wyckoff.

Confidential

Page 3
For use by those Pisces Members who have purchased the Wyckoff Course from SMI.

10/4/13

WYCKOFF IMPORTANT POINTS

SECTION 3
1. The purpose behind Wall Street and the market is to finance businesses. 2. Some securities are good - others are not so good. 3. Seasoned securities are those on the market for a long time and with established earning power and value. 4. Tape and chart reading helps us to relate price movement and volume to the future course of stocks. 5. Always strive to select the most promising issues. 6. Study charts with the purpose of judging the behavior of the stock and the motives of those who dominate it. 7. Prices reflect strengths and weaknesses of stocks. 8. Important facts for operations in the market are: a. price movement b. volume c. relationship of price movement to volume d. time for each movement. 9. When trading, ignore all tips rumors. and other inside information.

Confidential

Page 4
For use by those Pisces Members who have purchased the Wyckoff Course from SMI.

10/4/13

WYCKOFF IMPORTANT POINTS

SECTION 4
1. 2. Most principal moves in the market are caused by large interests. Charts are graphic representations of stock transactions.

3. Charts have great value in determining the position and probable future trend of the market or an individual stock. 4. To study charts, look for the motives behind the action which the chart portrays.

5. The WSMI (Wyckoff Stock Market Institute) recommends three types of charts: Vertical Line Charts, Figure Charts, and Intra-Day Wave Charts. 6. 7. Vertical line charts show the high, low, and closing prices as well as the volume. Volume and price movement provide the greatest aid in: a. determining the direction of coming moves. b. deciding when to buy or sell. c. knowing when a stock is on the springboard.' d. knowing when a move is culminating. On figure charts. a person is able to detect accumulation and distribution from the general formations.

8.

9. Horizontal formations on the figure chart indicate the probable direction and approximate number of points a stock should move. 10. Horizontal formations on figure charts are of value in determining: a. how far a stock should move. b. when it meets opposition. c. the trend. d. when a stock is on the springboard.' 11. Figure Charts only take into account whole number fluctuations. a. A 3-point figure chart disregards all reversals less than three whole digits. b. A 5-point figure chart disregards all reversals less than 5 full digits. 12. The 1-pt. figure chart indicates immediate objectives; whereas the 3-pt. figure chart is used as a guide to the general trend.

Confidential

Page 5
For use by those Pisces Members who have purchased the Wyckoff Course from SMI.

10/4/13

WYCKOFF IMPORTANT POINTS

SECTION 5
I. Every upward or downward swing of the market Consists of numerous buying or selling waves. 2. The degree of success or failure of buying or selling waves indicates whether the market is growing stronger or weaker. 3. In buying stock look for the down waves in the market and in your stock. 4. The waves provide clear indications of the relative changes of supply and demand. 5. To be able to determine the turning points is the mark of the ability of a good trader or investor. 6. It is important to master the ability to: a. determine the final tops of bull markets and intermediate or minor up moves. b. determine the final bottoms of bear markets and the intermediate and minor down moves. 7. Cover your shorts and go long at the bottom of a panic. 8. Sellout all long stocks and go short at the top of a boom. 9. Control your emotions.

Confidential

Page 6
For use by those Pisces Members who have purchased the Wyckoff Course from SMI.

10/4/13

WYCKOFF IMPORTANT POINTS

SECTION 6
1. Our trend chart of a general market index is the medium through which you are able to study larger waves of the market. 2. The Intra-Day Wave Chart enables you to detect the approaching turning points of the large waves generally two to four days in advance. 3. Group charts or the Position Sheet enable you to determine which groups are the most advantageous for trading. 4. Aim to trade in harmony with the trend of the market. 5. A a. b. c. d. minimum recommendation of chart records are: the Wyckoff Wave and Optimism-Pessimism vertical line charts of 10-25 stocks figure chart of 25-100 stocks the Intra-Day Wave Chart (IDWC)

6. Weekly and monthly vertical charts are not sufficiently sensitive to permit accurate timing but may be used in combination with daily vertical line charts and figure charts to give meaningful indications. 7. Weekly and monthly vertical line charts are of value for their long range background.

Confidential

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For use by those Pisces Members who have purchased the Wyckoff Course from SMI.

10/4/13

WYCKOFF IMPORTANT POINTS

SECTION 7
I. The most important aspect to know about the market is the trend.

2. Our aim is to operate in harmony with the trend. 3. The Wyckoff Wave is a market index, which reflects the movement of the market leaders. 4. A selling climax is caused by panicky unloading of stocks by the public (supply) which is matched by buying (demand) of: a. experienced operators b. large interests c. short covering by bears who sense a turn. 5. An abnormal increase in volume is characteristic of a selling climax. 6. After a technical rally, if prices hold around or above the climax lows on shrinking volume. Then we have an indication of support and the completion of liquidation 7. Three possible buying opportunities to establish a long position are: a. after the completion of a selling climax. b. after completion of a secondary reaction where the selling pressure is being lifted as shown by closes for the various days. c. when the index breaks into new high ground. (The last is the least satisfactory since the risk would not be at a minimum.) 8. When the trend is doubtful take a neutral position. 9. To limit risks. Place stop orders below the previous support points in long trades. 10. Bullish behavior is often accompanied by higher tops. Higher lows. And higher closes in combination with gradually increasing volumes. II. Absorption rather than distribution may be observed by: a. Volume remaining low on reactions or possible tapering off b. Price movement restricted to a narrow range as compared to a halfway reaction c. Volume consistently building up, or there is a lifting of support points. 12. Large volume with no further material gain is an indication of distribution. 13. Increased public participation creates active demand (of a poor quality) which facilitates selling (supply of a good quality) by large. interests. 14. At the top of a rally or up-trend, close out your long positions and seek those stocks in the weakest technical position to establish short commitments. Confidential Page 8
For use by those Pisces Members who have purchased the Wyckoff Course from SMI.

10/4/13

WYCKOFF IMPORTANT POINTS

15. Hypodermics is the sudden run-up of prices on expanding volume created by large interests. It may be an indication of a turning point. 16. Sharp acceleration of a downward movement often creates an over-sold condition. 17. Declining markets are normally accompanied by lower volume than advancing markets, except perhaps at times of active liquidation. 18. A sudden or abnormal increase in volume, appearing after a given price movement has been in progress, usually indicates the end or the approaching end of that particular movement. However. if this occurs when the price breaks through a defined trading range. this probably indicates a continuation of the movement in the direction of the break-through. 19. A a. b. c. common sequence in market fluctuations is: selling climax a: buying climax technical rally or b: technical reaction secondary reaction. c: secondary rally

20. Risks are greatly increased by: a.failure to liquidate promptly on early warnings of danger to bull position b.refusal to place stop orders on long commitments c. purchasing of issues when prices are up and the public is buying emotionally. 21. The market seldom runs continuously in one direction for an extended period of time without some type of reversal.

Confidential

Page 9
For use by those Pisces Members who have purchased the Wyckoff Course from SMI.

10/4/13