In China, you may have heard of Dow Theory, Gann Theory, Elliott Wave Theory, and Chan Theory... but you may not know Richard D. Wyckoff and his Wyckoff Method.

Richard D. Wyckoff is not well-known in the domestic trading circle, but he was a pioneer of market technical analysis in the early 20th century. He is considered one of the five "giants" of technical analysis, and his self-created "Wyckoff Method" is also known as one of the most trustworthy and reliable theories.

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Legendary Investment Life, Created the "Wyckoff Method"

Richard D. Wyckoff was born at the end of the 19th century (1873-1934). At the age of 15, he became a stockbroker; at the age of 20, he established his own brokerage firm. In 1907, he founded the compass of the market at that time - "The Wall Street Magazine," where he was both the founder and editor-in-chief.

Due to Wyckoff's accurate and unique analysis, he quickly gained hundreds of thousands of followers on Wall Street, which made his trading advice have too much impact on the market, forcing him to find ways to reduce his followers.

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Wyckoff was dedicated to market analysis and order interpretation. He interviewed and summarized the trading methods of the legendary stock masters of the time, including J.P. Morgan and Jesse Livermore, thus forming a complete set of trading theories, including technical analysis and trading psychology, which later generations called the "Wyckoff Method."

However, Wyckoff saw individual stock investors repeatedly fail, so he committed himself to introducing the rules of the market game and the impact of the underlying large capital to individual investors.

Unable to bear watching batch after batch of investors being harvested in the financial market, Wyckoff established a school in 1930, where the main course was to introduce how to identify the process of the market maker collecting chips and distributing chips. To this day, many professional traders and institutional investors are still applying the Wyckoff Method.To this day, as a prominent figure of the same era as Livermore, even abroad, the "Wyckoff Method" is intentionally or unintentionally concealed by the vast majority of those who are well-versed in this field, because they all know that in the field of technical analysis, Wyckoff's analytical method is very effective. It is not just a set of theories, but a set of practical methods that have been applied for more than a hundred years, and they are as reluctant as possible to let more people know about this method.

Main content of the "Wyckoff Method"

The "Wyckoff Method" can be very complex when applied to market transactions, but the foundation of this method is very simple. The foundation of the "Wyckoff Method" includes two goals, three laws, and five steps. As long as traders build their understanding of the "Wyckoff Method" on these foundations, no matter how complex the market throws at them, they can continue to achieve success.

Two goals

1. Protect the principal;

2. On the basis of consistency, earn profits from the market that are much greater than those of guaranteed investment products.

Three laws

1. Law of supply and demand: The eagerness to exchange cash for stocks or to exchange stocks for cash is the manifestation of supply and demand, and this is the reason for the rise and fall of the price of the trading or investment carrier. We usually observe it through volume and price analysis.

2. Cause and effect law: The surplus between supply and demand is not random, but the result of key events in market behavior, or the result of the preparation period. Wyckoff taught that after a period of development in the preparation stage, traders can use these developments to judge the surplus of supply and demand in the next period.

3. Effort vs. result law: The change in the price of the trading carrier is the result of effort, and the effort is expressed by the level of trading volume. The synchronization between effort and result will promote further price movement, while the lack of synchronization between the two will prompt a change in direction.Translate the following passage into English:

Five Steps

1. Identify the trend and the market's position;

2. Determine the strength and weakness relationship between individual stocks and the market;

3. Select those stocks that show a large number of reasons or a long period of preparation;

4. Determine those stocks that are ready to react to the results;

5. Determine the timing when the stock will reverse (the market reversal point).