The Richard Wyckoff Method of Trading and Investing in Stocks
(The Richard Wyckoff Method of Trading and Investing in Stocks ) CONTENTS
How to Proceed A-B
Foreword 1M 1-2
Basic Law 2M 1-4
Judging the Market by Its Own Action 3M 1-4
Forms of Charts 4M 1-27
Buying and Selling Waves 5M 1-3
Chart Records 6M 1-4
Determining the Trend of the Market – Composite. Averages 7M 1-35
Comparing Strength and Weakness – Group Averages 8M 1-25
How a Campaign is Conducted – Individual- Chart Studies – Part I 9M 1-10
How the Operator’s Intentions may be Detected – Chart Studies II 10M 1-13
Figure Charts – Individual Chart Studies – Part III 11M 1-13
Figure Chart Studies – Individual Stocks – Part IV 12M 1-9
Figure Charts – N. Y. Times Average – Chart Studies Part V 13M 1-10
Market Technique – Volume Studies 14M 1-14
Significance of Trend Lines 15M 1-20
Vertical Line Charts – Chart Studies Part VI 16M 1-34
Vertical Line Charts – Chart Studies Part VII 17M 1-26
Selecting the Best Stocks – Position Sheet – Barometer 18M 1-19
How to Determine the Position of an Individual Stock 19M 1-14
Buying and Selling Tests 20M 1-7
Refinements 21M 1-10
The Wave Chart 22M 1-39
Stop Orders 23W 1-17
General Instructions – Cautionary Suggestions 24M 1-18
Market Philosophy – Cautionary Suggestions (Cont.) 25M 1-11
HOW TO PROCEED WITH THE STUDY OF THE RICHARD D. WYCKOFF COURSE OF INSTRUCTION
The Richard Wyckoff Method of Trading and Investing in Stocks
The following is recommended as a plan of study which should facilitate your progress and enable you to get the most out of this Instruction:
1. Read through the The Richard Wyckoff Method of Trading and Investing in Stocks entire Course casually without attempting to study any part of it. YOU will find numerous cross-references in the text. Disregard these for the present. Let your, first casual reading be for the purpose of gaining a general idea of the scope and presentation of the subject matter.
2. Read through the entire Course a second time, again, ignoring the
cross- references. This time, weigh the The Richard Wyckoff Method of Trading and Investing in Stocks meaning of each paragraph more care- fully, but do not attempt to dwell upon any part or section for more than a few minutes yet. Let the purpose of this second reading merely be to impress upon your mind more firmly the ideas you absorb as you go along.
If necessary, read The Richard Wyckoff Method of Trading and Investing in Stocks the whole Course through a third time before you begin to concentrate on any particular part. By these repeated readings you will find that your memory will retain more firmly the ideas that are presented in each section. Then, when you do begin to study and analyze each paragraph intensively, you will have a clear understanding of the way in which the various parts, fit into, the complete philosophy of this Instruction.
Bear in mind that everything in the Course is important. Nothing is superficial. Do not neglect those sections which are necessarily shorter, than others. Every paragraph is as much an integral part of the Course as any other paragraph.
3. On your second or third reading, mark any paragraphs that may not be clear to you.
4. Now study carefully Sections 4M and 6M and practice making vertical line and The Richard Wyckoff Method of Trading and Investing in Stocks figure charts, as explained in Section 4M, until you are sure that you understand how to construct them properly. Should you have any dif- ficulty or doubts concerning the method of making the 1 or 3 point figure charts or the vertical charts, consult our Coaching Staff — that is send us samples of the charts you have made in accordance with your un- derstanding of the instructions and we shall be glad to check your work.
5. Next, study and analyze carefully Sections 5M to 25M, inclusive, again marking any portions of the text which may not be clear to you. Make full use of all cross-references and – footnotes as you go along. .The cross- references are indicated thus: “Sect. —, Pg. —, Par. —,” which means that when you come to one of – these The Richard Wyckoff Method of Trading and Investing in Stocks references you should turn to the Indicated section, page and paragraph and study it in conjunction with the text in the part of the Course where you are at the moment. Note that paragraph one begins on any given page, with the first indentation on that page.
For instance, turn to Page 2, Section 3M. Paragraph 1 begins with the
fifth line from the top of the page, which reads “No one can deny, etc.”; Paragraph 2 begins with the words “Tape Reading and Chart Reading, etc.” The first four lines on the top of the page are the run-over from paragraph 5 on the preceding page.
In all cases where charts are discussed, follow the instructions given in Section 7M (Pg. 2, Par. 3) for studying them alongside of the reading matter in the Course.
6. Review the portions of the text you may The Richard Wyckoff Method of Trading and Investing in Stocks have marked as suggested in items 3 and 5, above. If you still find that you do not understand them, send us a list of these questions (referring to the proper section, page and paragraph number) and any other questions, that I are puzzling you, so we may clear up your difficulties.
7. Next, practice making up a Position Sheet and the Technical Position Barometer, consulting freely the instructions contained in Sections 18M and 19M.
8. You will now be ready to test your ability to apply the principles you have learned from this Course by making a series of paper trades.
9. After you have completed the above steps, one by one, if you have troub- le, in applying any of the principles, or if your paper trades do not de- velop according to expectations, you are urged to The Richard Wyckoff Method of Trading and Investing in Stocks select a paper trade, that illustrates your difficulty and submit it to us. Be sure to include a statement showing when and at what price you bought or sold; where you placed your stop, the technical position of the stock as you understood it at the time you entered the trade; and an outline of the reasoning you employed in arriving at your decision to make the trade.
10. It will be advisable also for you to send us copies of your Position Sheets and Records of Paper Trades for review and criticism. Please use the short forms of these records which are furnished you for the purpose of securing this additional instruction. Do not fail to accompany these records with full outline of your own reasons for your decisions.
11. As you gain proficiency in the application of this Instruction and ac- quire experience in the interpretation of market action, you will find an occasional review of The Richard Wyckoff Method of Trading and Investing in Stocks your Course extremely beneficial. As your knowledge of stock market technique increases, your Course will acquire increasing value as a reference work. Therefore, do not lay it away — but consult it often. It not only will refresh your memory of vital principles, but by constant review will awaken you to the discovery of refinements and principles that may have escaped your notice on earlier occasions.
THE BASIC LAW OF SUPPLY AND DEMAND The Richard Wyckoff Method of Trading and Investing in Stocks
I had been in Wall Street 20 years when I discovered that it was possible to judge the future course of the market by its own action. In my book, “Wall Street Ventures and The Richard Wyckoff Method of Trading and Investing in Stocks Adventures Through Forty Years” (pg. 168) I stated my experience and observations in 1909 as follows: “I saw more and more that the action of .stocks reflected the plans and purposes of those who dominated them. I began to see possibilities of judging from the very tape what these master minds were doing. My editorial work was proving a most valuable means of self-education. In gathering material that would benefit The Richard Wyckoff Method of Trading and Investing in Stocks my readers, I was actively searching out the stuff that would aid me personally. While my subscribers were given the best of what I collected, there was much in material discarded which helped to build up what I might call a code of enlightened procedure for use in this greatest of all the world’s games.”I had a friend who had been a member of the Exchange and who was well up on the technique of the market from the standpoint of the floor trader. We often discussed the difference between reading the tape simply to follow price changes (as most clients did) and reading the tape in order tojudge the probable The Richard Wyckoff Method of Trading and Investing in Stocks action of stocks in the immediate future. “Starting from the simple ground that the logical, action of a stock was to
decline when offerings exceeded the number of shares bid for and to advance when the amount bid for was greater than the amount offered, we agreed that the quantity or volume of stock changing hands in each succeeding transaction was of great importance. Anyone who undertook to read the minds of the momentary buy-ers and sellers was able to measure, to a certain degree, their eagerness or anxiety to buy or sell; also to measure the force of the buying power or selling power as shown by the number of shares; and to judge of the purpose behind the action, whether it was to buy without advancing the price, or to force the price up, or to mark it down, or to discourage buying or selling by others, as the case might be.
“Each transaction carried with it certain evidence, although it The Richard Wyckoff Method of Trading and Investing in Stocks was not always possible to interpret that evidence. All stocks no matter by whom they
were owned, bought or sold, looked alike on the tape. But the purposes behind this buying and this selling were different and these might be fairly clear to those who understood market psychology. “Each transaction, although recorded only once, represented a meeting of minds; those of a buyer and aseller. This meeting of minds took place at a certain post on the floor of the Stock Exchange, even though the buyer might be in the far west and the seller in Europe. “Not all transactions were significant, but the interpreter must detect those which were. He must see that some indicated a purpose. Some one or some group was The Richard Wyckoff Method of Trading and Investing in Stocks carrying, or attempting to carry, something through. He must take advantage of that.” Continuing my studies of the tape, I realized, that the Basic Law of Supply and Demand governed all price changes; that the best indicator of the future course of the market was the relation of supply to demand. The Law of Supply and Demand operates in all markets in every part of the world. When demand exceeds supply, prices rise, and when supply is greater than demand, prices decline. This is true not only of stocks; it is constantly being demonstrated in markets for wheat, com, cotton, sugar and every other commodity that is bought and sold; also in other markets such as real estate, labor, etc. I demonstrated this further in a series of articles entitled: “Studies in Tape Reading” which attracted wide attention as the first of their kind ever published anywhere, so far as I knew. My basic idea in this series was that the stock market, by its own action,continually indicates the probable direction of its immediate and future The Richard Wyckoff Method of Trading and Investing in Stocks trend, and anyone able to determine this with accuracy should attain success in tradingand investing. Coming events, I claimed, were foreshadowed on the tape because large interests there disclosed their anticipation of advances or declines by their purchases or sales. So, too, with the manipulator who was endeavoring to raise or depress prices. If one were to become sufficiently expert, he could judge by the action of stocks what was in the minds of these large interests and follow them. The trend was simply the line of least resistance. When a stock met op-position in its rise, it must either be strong enough to overcome this resistance (selling) or it must inevitably turn downward, and when, in its downward course, sufficient buying was encountered to halt the decline, it would turn upward. The critical moments in all these various phases of the market were these minor and major turning points, or else the points where the price broke through the opposition into a new field. Further development of this method of judging the market from its own action resulted in my using it as a basis for predicting the probable course-of-the market, and this eventually led to my issuing weekly, “The Trend Letter” (first published in 1911) which had a most successful career for many years. In fact, the forecasts contained in this Letter were so accurate that a large following was developed. As a result of a series of successful campaigns we were not only overwhelmed with business but brokerage houses throughout the country passed along these advices to their clients. So many followers were thus gained that an undue effect was had on the quotations for the stocks in The Richard Wyckoff Method of Trading and Investing in Stocks which we traded, and in certain cases the effect on the market was important. All of the abovein much more detail, is described in my book “Wall Street Ventures and Adventures Through Forty Years” which it is advisable for you to read.My reason for mentioning these facts is to show that this method of judging the market by its own action was highly successful, from the standpoint of profits realized for subscribers who followed my advices, as well as for many thousands of people who were not subscribers but who bought and sold when wedid. From the above you may judge how vital it is, in the stock market, as in every other field, to get down to the right principles.
JUDGING THE MARKET BY ITS OWN ACTION The Richard Wyckoff Method of Trading and Investing in Stocks
The business of Wall Street is to finance corporations and to sell the securities — stocks and bonds — which result from this financing. Some secur-
ities are good; others not so good. Those who manufacture and sell them to the public know their value best. The public has comparatively little idea of their real value, except seasoned securities — those which have been on the market for a long time and which, therefore, have established earning power and intrin-sic value. In every case the banker who does the financing and the dealers who help him distribute, have paid for their securities either in cash or in services, or underwritten them. The object is to market these stocks and bonds at ashigh prices as possible. This marketing is done through distributing houses and syn-dicates, by private sale, by public offering, and by means of listing on the stock exchanges. In the latter case, the stock is advertised by making it active on the tape. If the price be advanced, and the transactions made large, the activity attracts buyers, and those who are handling the stock are thus able to dispose of their shares. Sponsorship is continued after the market is thus made for a company’s shares. The bankers operate for themselves, or others operate forthem.After a stock is floated, its sponsors try to create a stable market and support the price aswell as they can without taking back too much stock. When it is thoroughly distributed and enough people are interested in the stock to make a market which takes care of itself, under ordinary conditions, the original banker, syndicate or sponsor may discontinue operations and turn attention to some other which affords a new opportunity for money-making. Other interests may begin operations in that stock. Generally speaking, there are usually one or more sponsors or large operators working in every stock. Sometimes there are many. These interests see opportunities for profit, accumulate a line, mark up the price when conditions are favorable, and then sell out. Or they may sell short, depress the price and cover. No one can deny that in Wall Street the, big fish eat the little ones. Large operators could not operate successfully without the large number of
people making up the public; that is, if there were only ten big interests in the market and no public, these ten could only make a profit by dealing with each other. It would be difficult for one crowd to deceive any of the nine others. But when the public enters the stock market, the large operator’s game becomes easier for him. Tape Reading and Chart Reading, enable one to detect and profit by these inside operations or manipulation; to judge the future course of stocks, by weighing the relation of supply and demand. This sometimes can be done from price movement alone, but if you consider also the volume of the transactions you gain an additional and vitally important helpful factor. By accurately judging this supply and demand, you are able to decide the trend of the whole market and of certain stocks; also which stocks to buy or sell, and, what is even more important, when to do so. You always aim to select the most promising opportunities; that is, the stocks which are likely to move soonest, fastest and farthest. You make no commitments without sound reasons, and you avoid undue risks. Whenever you study the tape or a chart, consider what you see there as an expression of the forces that lift and depress prices. Study your charts not with an eye to comparing the shapes of the formations, but from the viewpoint of the behavior of the stock; the motives of those who are dominant in it; and the successes and failures of the buyers and sellers as they struggle for mastery on every move.The struggle is continuous. The tape shows all this in detail. The charts enable you to pick the market apart and study whatever portion or phase of it you choose. Supply and demand may be studied on the tape of the stock ticker, and to even better advantage from charts. The tape is like a moving picture film. Every minute of the day it is demonstrating whether supply or demand isthe greater. Prices are constantly showing strength or weakness: strength when buyers predominate and weakness when the offerings overpower the buyers. All the various phases
from dullness to activity; from strength to weakness; from depression to boom, and from the top of the market down to the bottom — all these are faithfully recorded on the tape. All these movements, small or great, demonstrate the workings of the law of supply and demand. By transferring to the charts portions of what appears on the tape, for study and forecasting purposes, one is more readily enabled to make deductions with accuracy. And now that you are undertaking to learn this Method it is best that you prepare your mind for it by discarding most of the factors that you have heretofore employed in forming your judgment and making your decisions, such as: tips, rumors, news items, newspaper and magazinearticles,analyses, reports, dividend rates, politics and fundamental statistics; and especially the half-baked trading theories which are expounded inboardrooms and popular books on the stock market. It is not necessary for you to consider any of these factors because the
effect of all of them is boiled down for you on the tape. Thus the tape does for you what you are unable to do for yourself: it concentrates all these elements (that other people use as a basis for their stock market actions) into the com-bined effect of their buying and selling. You draw from the tape or from your charts the comparatively few facts which you require for your purpose. These facts are: (l) price movement, (2) volume, or the intensity of the trading, (3)
the relationships between price movement and volume and (4) the time required for all the movements to run their respective courses. You are thus far better equipped than the man who is supplied with all the financial news, statistics, etc. from the whole world. I, therefore, claim that:
You need never read anything on the financial page of your newspaper except the table of stock prices and volumes. You need pay no attention to the news, earnings, dividend rates or statements of corporations. You The Richard Wyckoff Method of Trading and Investing in Stocks need never study the financial or the businesssituation. You need not understand railroad or industrial statistics, the money market, the crop situation, the bank statements, foreign trade or thepolitical situation. You can absolutely ignore all the thousands of tips, rumors, reports and especially the so-called inside information that flood Wall Street. You can discard all of these completely and finally. UNLESS YOU DO THIS YOU WILL BE UNABLE TO GET THE BEST RESULTS FROM YOUR MARKET OPERATIONS.
The Richard Wyckoff Method of Trading and Investing in Stocks Profile:
Author : Richard D. Wyckoff
Release date : 1931 – 1935
Number of pages : 405
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