Richard Wyckoff

Volume Spread Analysis has its roots from Richard Wyckoff’s works in studying the stock market and his trading methodologies. Wyckoff was a trader and educator in the stock, commodity and bond markets throughout the early 1900s. His wealth was gain through trading in the stock market but at the same time, he also became unselfish about sharing his experience in Wall Street. Hence, he turned his focus on education, research, teaching and publishing exposés such as “Bucket Shops and How to Avoid Them”. He studies Jesse Livermore, a famous trader who makes over USD100 million in 1929 market crashes. In today's value, USD100 million then is worth USD1.3 billion now adjusted for inflation.

The results of Wyckoff’s research and teaching became known as the “Wyckoff Method of Technical Analysis and Stock Speculation” or in short known as “Wyckoff Method”. Wyckoff Method focuses on straightforward bar chart pattern recognition that provides some insight as to how and why professional players are interested in buying and selling a particular security. These methods are based on one of his well-known concept called “Composite Operator”.

Many of Richard Wyckoff's students/followers include professionals like William O'Neil, Dan Zanger and to some extent, Victor Niederhoff, ex-partner of George Soros who turned USD20,000 to USD 20 million in 18 months during 1990s.

Ray Dalio, the 69th World Richest Hedge Fund Manager worth USD16.8 billion also shared in his recent interview with Bloomberg that he analyses price and volume to buy and sell equities and bond.

Finally, Dan Zanger is said to make USD10,000 to USD18 million in 18 months using Wyckoff variation adjusted for his trading style.

Not forgetting World Cup Trading ex-Champion like Earl Ernler and Tim Rayment who are students of Tom Williams, who himself is a student/follower of Wyckoff price and volume century old and proven trading method.

If the best of the bests professional are using price and volume trading or better known as Volume Spread Analysis, shouldn’t you too?

Wyckoff method aims to reveal the Composite Operator’s motive and his next move through recognizing bar chart patterns. He emphasizes that it is an important psychological and tactical advantage to stay in harmony with this Composite Operator and follow his footsteps in order to grow your portfolio or net worth. In today’s era, the Composite Operator is more commonly known as the Smart Money.

The following are the three fundamental laws of the Wyckoff Method:

1. The Law of Supply and Demand

States that when demand is greater than supply, prices will rise, and when supply is greater than demand, prices will fall. Wyckoff Method studies the relationship between supply vs. demand using price and volume over time on bar chart.

2. The Law of Effort vs. Results

Divergences and disharmonies between volume and price often foretell a change in the direction of the price trend.

3. The Law of Cause and Effect

Suggests that in order to have an effect on you must first have a cause, and that effect will be in proportion to the cause.

Although the founding of the Wyckoff and Associates educational enterprise was in the early 1930’s, his methods has stood the test of time as the Wyckoff’s Price & Volume Trading method became the mainstay of The Graduate Certificate in Technical Market Analysis at Golden Gate University in San Francisco, California, U.S.A.

Today, Wyckoff’s Price & Volume Trading method is still the foundation and basis of many trading methods used by highly acclaimed professional traders and investors worldwide such as Tom Williams, William O Neil, Dan Zanger, Earl Erenler, Tim Rayment & Hedge Fund Manager Ray Dalio of Bridgewater Associates, etc.

Tom Williams

Tom Williams is a very successful syndicate trader in United States and the founder of Volume Spread Analysis (VSA) Methodology. Tom began his trading career while working in Beverly Hills for a boss of an elite group of syndicates. While Tom draws charts that the syndicate group would use to make their speculative attacks, he recognized the relationship between price movement, volume and closing price.

To further his understanding in charts, Tom was sent to a Wyckoff Chart Reading course by the syndicates group. By combining his experience with Wyckoff methods, Tom realised that all the clues to make a winning trade lie all on the charts, if you know how to read them correctly.

Tom has retired from professional trading at the age of 40 and focus on enhancing and simplifying Wyckoff’s method to create his own more potent methodology whereby he names it Volume Spread Analysis (VSA). The main basis behind VSA is that professional traders or smart money leave footprints in the market and these footprints can be found in the volume data. With this basis, VSA provides a creative set of market timing indicators that will enable you to time your entries (and exits) in today’s fast-paced financial markets. Therefore, VSA traders will have a significant advantage over average trader or investor as VSA traders are trading with an edge and higher odds of winning.

Tom Williams has been energetically and successfully applying his unique methodologies for the last 30 years to the Stocks, Forex and Futures markets. He is almost 88 years old and ...

… a few years ago, I was very fortunate to be able to enhance my learning on VSA further from my great sifu, Tom Williams at his home in England. During our sessions, he had taught me a lot more aspects relating to importance of noticing volume and price actions, which had been beneficial to my trading career and professional fund management. Tom’s wisdom still resounds to me today....

“Professionals operating in the markets are very much aware of the emotions that drive YOU (and the herd) in your trading.” Tom Williams

“Volume is activity! You have to ask yourself, why is the ‘smart money’ active right now?” Tom Williams

Watch out for next article in this series of education articles brought to you by iVSAChart, “Article 6 - How to Detect Smart Money Movement” under Series A: Understand The Basic.

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This article only serves as reference information and does not constitute a buy or sell call. Conduct your own research and assessment before deciding to buy or sell any stock. If you decide to buy or sell any stock, you are responsible for your own decision and associated risks.