Question 1

What is a Wyckoff pattern?

Accepted Answer

The Wyckoff pattern is a part of the famed Wyckoff Method — a trading strategy that focuses on analyzing market movements and trading volume. This pattern follows the concept of institutional money entering and exiting the market. The Wyckoff pattern broadly comprises four parts — accumulation, markup, distribution, and markdown.

Question 2

Is a Wyckoff pattern bullish?

Accepted Answer

The Wyckoff pattern can be both bullish and bearish, according to the phase it is in. During the accumulation phase, with institutional investors buying more of an oversold asset, the pattern would be in the bullish territory, eventually validated by the markup phase. Similarly, the distribution phase is bearish, with heavy institutional sell-offs happening and eventually leading to the markdown phase.

Question 3

Is the Wyckoff Method effective?

Accepted Answer

The Wyckoff is one of the more reliable time-tested trading strategies in play. However, for it to work, you must be able to correctly analyze the right points or sub-phases of the Wyckoff pattern. Plus, you are better off pairing the Wyckoff patterns with other reliable technical tools like volume indicators, oscillators, and moving averages.

Question 4

How accurate is the Wyckoff pattern?

Accepted Answer

Even though the Wyckoff pattern is fairly accurate, the extent of accuracy depends on the market condition, correct pattern interpretation, and even the confirmation signals provided by the supplemental technical analysis tools. However, no trading tool is 100% accurate and is always subject to broader market sentiments, especially when you are dealing with crypto. With Wyckoff, you should always have a risk management strategy in place.

Question 5

What are the three Wyckoff laws?

Accepted Answer

The Wyckoff Method lives by three laws: the law of supply/demand, the law of cause and effect, and the law of effort vs. result. The first law focuses on the fact that the price of an asset depends on the supply-demand imbalance. The second law delves deeper into the first law and puts forth that the effect or the price movement is made of smaller causes (buying and selling). And finally, the third law suggests that price changes or rather the result depend on the effort (trading volume).

Question 6

What is Wyckoff's last point of supply?

Accepted Answer

The last point of supply, or the LPSY of the Wyckoff Method, is the final stop before the price drop or the markdown phase begins in the price cycle. At LPSY, most Smart Money investors end up dumping their assets, not so discreetly anymore. This leads to a market slump, and individuals who haven’t sold their holdings at the LPSY tend to face the ominous wave of some sharp correction.

Question 7

What is effort vs. result in Wyckoff?

Accepted Answer

Effort vs. result is one of the driving points of the Wyckoff Method. In this context, the effort represents volume, whereas the result represents the price changes or price movements. In case the effort and results are in sync, the market could be moving in a trend. However, if the effort and result aren’t aligned, there might be a potential trend reversal on the cards.

Artyom Gladkov

Latest articles by Artyom Gladkov

What Is the Wyckoff Method? Crypto Trading Pattern Explained

Why Blockchain RPC Node Providers Are Crucial for Web3

How To Evaluate DEXs With On-Chain Analytics

ERC-4337: A Complete Guide To Account Abstraction

How Directed Acyclic Graphs (DAGs) Solve the Problem of Forking

Falling Knife in Crypto Trading: What You Need To Know

How To Use Arbitrum Bridge To Bridge Ethereum Tokens

Understanding Reversal Candlestick Patterns: A Complete Guide