Yesterday, I wrote for everyone to understand a part about Smart Money, to understand why when good news comes out, the market still goes down.
Today, I will write about a relatively effective technical analysis method for everyone to understand better:
💥 It is Wyckoff -->> used to understand how the large money flow (smart money) operates: organizations, whales, and investment banks.
💥 The core of Wyckoff:
Divides the price cycle into 4 main phases:
1. Accumulation
- After a long downtrend.
- Price fluctuates within a narrow range (sideways).
-->> Smart money quietly buys in when the market is feeling frustrated.
- Ends the phase with a breakout upwards --> beginning of an uptrend.
2. Markup
- Price breaks out of the accumulation zone.
- Strong upward momentum, volume increases --> main upward trend.
- FOMO begins, retail investors pour money in.
3. Distribution
- After a strong increase.
- Price moves sideways, fluctuates within a range.
-->> Organizations begin to gradually sell out (take profits), but conceal it by creating noise.
- Ends the phase with a breakdown -->> beginning of a downtrend.
4. Markdown
- Price drops sharply, continuously creating new lows.
- Retail investors panic and cut losses.
-->> Ends when the price becomes attractive enough for organizations to buy back --> returns to accumulation.
💥💥 Summary:
Accumulation -> Markup -> Distribution -> Markdown ->> repeat
💥 Wyckoff also includes:
- Secondary phases in the accumulation/distribution zone (I have written about this already).
- Drawing schematics (Wyckoff model diagrams) to track price behavior.
-->> Understand the traces of large money flow --> trade in the direction of the trend in crypto, forex, stocks...
💥 Combines well with volume + price action.
💥 I have attached diagrams of the 2 main models, Accumulation and Distribution. Everyone should read the above carefully and combine it with chart observation to draw conclusions. Extremely useful ❤️