Wyckoff divides the accumulation phase - the cause of the uptrend into 5 phases is A, B, C, D, E. Each phase represents 1 market state, where:

PHASE A: Previous downtrend phase, including 4 events

1. Preliminary Support (PS): The first sign of Strong hand (or Composite Man) comes after a series of consecutive declines, a few candles with higher volume than average cause prices to pause, this buy action has may lead many traders to think that the downtrend is over and buy-in, however, PS event could happen more than once before the price actually hits Selling Climax. Main features of PS:

  • Volume is larger than normal at a few candles but the next price action is to continue to Break down.

2. Selling Climax (SC): Confirmation for the first support zone of (Trading Range), which can be accompanied by sudden large trading volume, long body candle, fast falling price, or large volume candlestick series Over-average is associated with narrow body candles.
  • This event happened when Strong Hand decided to absorb all the current supply on TT, taking advantage of the selling force generated by the Weak hand as soon as the price broke down the support level created by the PS event. This brutal intervention leads to an imbalance in Supply and Demand in the short term, creating a sharp uptick immediately after.
  • The lowest price of the SC event is also the lower channel of Trading Range - TR.
3. Auto Rally (AR): As a consequence of the intervention in TT from Strong Hand. This uptrend was then fueled by Weak hand's stop loss, Pro trader's short / sell profit-taking, Countertrend trader buying, and creating a bullish span that could last 2-3 days. . The highest peak of AR determines the upper channel of TR.

4. Secondary test (ST): AR's uptrend momentum exhausted, Countertrend trader took profit, Weak hand entered and sold trend continued, pro trader and Strong hand stopped to observe causing the price to fall again. However, this downtrend is no longer strong due to the lack of motivation. The price may return to retest the Supply and Demand balance at SC, and may also create a new bottom higher than SC.

* In case the price continues to break through SC and continues to decline, we need to be cautious because this shows that the Supply is still very strong, and Strong Hand does not seem to really want to accumulate assets at this price range. Most likely we are only witnessing 1 PS rhythm.

A standard PHASE A usually accompanies a breakup of a downtrend line with an ST span usually a retest of this downtrend. Phase A also marked the first change in price characteristics, from tending to sideways without a trend.

PHASE B: Accumulate - create Cause (Cause)


As a continuation after PHASE A, price moves from a trend (Down) period to a Sideway period without a trend. This stage is the time when Strong hand accumulates assets. This period can be long, possibly short, prices run-up, the trend is messy, erratic like the weather in Saigon.

This phase usually comes with countless false breaks in both directions and there are 2 main events that can happen:

1. Upthrust Action (UTA): The price breakout from the above channel is determined by the AR but immediately goes back to the Trading Range. This action is seen as a retest of the supply-demand balance at resistance, and usually the result is a false break.

2. Sign of Weakness in Phase | B | (SOW in phase | B |): The price break down from the lower channel is determined by SC but immediately goes back to Trading Range. This action is considered a re-test of supply-demand balance at the support zone. Like UTA, its result is also a false break.

The example of the chart above does not have an SOW in phase | B | shows the urgency of the Strong hand to absorb the current supply in the market, and therefore the Strong hand is ready to absorb this supply at the higher price range.

PHASE C: The last test - fatal stab, removes all Weak hand remaining from the game


A strong, proactive selling phase of Strong hand pushes prices close to the lower channel in most cases where the price will break through the lower channel to retest the balance of Supply and Demand at the support zone.

This downtrend is triggered by the Strong hand, but is continued by the Weak hand so it is usually very strong in the early stages but weakens later.

The main events that can occur during Phase C:

1. “Springs” or “shakeouts” occurs when the price falls below support but then (usually immediately) returns to TR. These events typically occur after Phase B has been around for a while and allow Strong hand to retest Supply before the price push campaign begins. If the supply appears at the break down of the lower channel (low trading volume), the supply is considered exhausted and no longer obstructs a prolonged uptrend. On the other hand, a large supply appeared at the time when the price broke down the lower channel, heralded a new downside span might appear. Average trading volume also usually means the price will have more Supply tests and we need to pay more attention. A Shakeout beat also gives CO another low-priced supply from Weak Hand.

2. Test - Strong hand re-tested the Supply amount many times in the rising span after the Spring / Shakeout event. A successful test of the Spring / Shakeout will form a higher bottom a small volume.
ACE see the example below in the standard view with a more cumulative model. The chart above the Strong Hand is a bit violent.


PHASE D - Change in price characteristic - from a sideways non-trend to an Uptrend


The price moved up a bit after the test in phase C, surpassed all resistance with increasing volume and large amplitude candles. The push is the first opening to prepare for a new uptrend.

The main events taking place in PHASE D:

1. SOS - the sign of strength. After the Spring / Shakeout, a sign of strength is a bullish span that breaks through the resistance zone with large fluctuating candlesticks, volume increases, and the bull's speed is also faster.

2. LPS - last point of support. During the up process, there will randomly appear one or more shallow retracements that create higher lows. When the price does not drop below these lows, we have LPS. On the other hand, a Spring / Shakeout shot with a price that cannot break down to the lower channel is also considered as LPS or otherwise known as False Spring / ShakeOut. If this happens, we have an indication that the Force of Demand is very strong.

3. Back-Up Action - BUA. Back-Up action is a chain of sensitive price action, occurring after the SOS event. The reason for the BUA span stems from the Strong hand wants to once again test the balance of supply and demand, this time around the resistance zone. BUA can come in many forms, a mini trading range, a few slightly bearish candles with low volume, or even a deep penetrating TR before.


Backup Action is the most important stage in the whole Wyckoff pattern, it must show the determination to absorb all the TS sold by Weak hand, the weak Trend follower, and Elliott Wave traders define the SOS rally as a wave. IV.c etc ..

The example above shows that a Back-Up beat is considered pleasant and easily recognizable on a data frame as a trading range.

PHASE E - On the uptrend - Effect


The uptrend is confirmed after the price breaks out of the BUA span in Phase D.

A few examples of the Cumulative Stage:


Apply accumulation model in Trading

Wyckoff's cumulative model not only occurs on the Monthly, Weekly, Daily timeframe but also can be customized to the application on shorter timeframe frameworks such as H4, H1, M30, M5, etc ...

The essence of the Accumulation pattern is the interpretation of the Supply-Demand-based balance based on price action and volume. The division of Phase, Trading Range on the chart makes it easy for traders to focus their attention on the important Price Zones and important events and thereby improve the accuracy in recognizing the opportunity to enter.

The Accumulation model allows us to have 3 entry points, illustrated in the following figure:


POE # 1: The confirmation

Point of entry # 1 - A sign that the price is forming a higher bottom, is a confirmation of a successful test span. Before that, we interpret the bearish move out of the lower channel on low volume as Spring span. Stoploss is placed 5-10 pips below the bottom of the Spring span.
Position: 50% standard position

POE # 2: The SOS breakout

A strong breakout after the successful test, the price surpassing the previous Spring peak showed that there will be a higher high after the next peak. Buy more at the breakout or wait for the breakout candle to close> Spring Peak.
The Stoploss should be 5-10 pips below the bottom of the last test span
Position: 30% standard position

POE # 3: the Backup Action breakout

The above example does not have POE # 3, the rule is very simple, we wait for the price to break out of this Backup Action peak and buy more.
Stoploss: Move all SL to the bottom of the BUA span 5-10 pips
Position: 20% standard position

Experience:

a. BUA often forms a Trading Range. Therefore, the entire position must be closed immediately after the end of Phase A of the BUA - Trading Range and redo the POE # 1- # 2- # 3 of this BUA span according to the above rules.

b. The Trading Range and Phases on the Monthly, Weekly chart shows the long-term trend. The Daily and H4 chart shows the mid-term trend. Smaller timeframes do not show trend so we should avoid trading on small timeframes but only use TRs on small frames to find the best POE, take POE # 1 for example. on a small frame.


If we could enter an order at the Test span of TR on M5 created by Spring span on H4, we would have POE # 1 much better than standard entry at POE # 1. However, this job must come from the fact that we correctly interpreted the breakdown rhythm from this lower channel as the spring span on the H4 frame, it makes sense to find a better POE if the event is not specified. on a large timeframe, entering a small timeframe to determine TR is an act of suicide.

c. The BUA on low volume will end quickly, the BUA with high volume will last longer since Strong hand just wants to absorb Supply at its value zone.

d. The volume is low, steady, maybe slightly up but not shocking is a sign of a steady upbeat rhythm. The volume increased, warning about a short-term reversal. The volume increases and then decreases, warning that the uptrend is about to end.

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