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# Wyckoff Laws and Trends

The classic technical analysis in trading is the method of Richard Waikoff. Based on rules and trading strategies that determine the best entry and exit points for trades. The uniqueness of the approach is that the price movement is influenced more by the laws of human psychology, rather than by mathematical calculations. The effectiveness of this method is evidenced by the popularity among traders of all levels.

## Waikoff's Laws

1. The law of supply and demand. If demand exceeds supply - the price of the asset increases, and vice versa, if the supply overlaps with demand - the price decreases. Oversupply of goods leads to lower value and sellers reduce the price so that buyers see the benefit in the purchase of goods. If there is a shortage of something, the price will rise, as buyers want to buy the goods they need.
2. The law of cause and effect is preceded by a preparatory stage for each period. During the accumulation period there is an uptrend, and the distribution is a downtrend. Wycoff has developed a method to assess the probability of trend strengthening after exiting the consolidation.
3. A reason is needed to change the price of an item. The power of movement will be directly proportional to the reasons that created it. The strongest movements to change the value of the currency occur when the price has spent a long time in the consolidation zones. When an asset has a high trading volume, it confirms the trend. Small volumes at a high price indicate a possible change in the trend.

## Types of trends by Waikoff method

• In total, according to Wykoff, there are three trends on the market:
• Upward when the price rises. Demand is greater than supply.
• Descending, when each minimum on the chart will be lower than the previous one and each maximum price will be lower than the previous one. Offers exceed demand.
• Horizontal, sideways, flat when there are no strong movements. They are called accumulation and distribution zones, and market participants fix their trades and hold up to the appearance of significant volumes.

### Trend change

By changing the volume of trades on the chart, you can predict the change in trend. If there is a calm movement and an increase in volumes, it indicates the stability of the trend. If the volumes have decreased significantly, the trend is fading and will not continue.

### Exit from the accumulation zone

The accumulation range is formed after the downtrend. Large participants close their positions and keep the price in the current indicators. It is usually not possible to reduce the price because of the existing strong demand.

If the graph shows an attempt to break the price boundary with the support of a large volume - most likely the growing trend begins. You can enter the market.

### Leaving the offer area

After the end of the uptrend, the offer period is formed. Market participants consolidate their positions and do not allow price growth. You can enter the trade after a strong level break down, after the closing of the signal bar.

In this period, there is often a false breakout, after which the price bounces back to the level. You can track the true breakdown of the level by the increased volume of transactions
Using elements of analysis on Waikoff, you can predict quotes, market movement and improve the efficiency of your trade.

19.03.2021
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