The Wyckoff strategy was developed by Richard D. Wyckoff, one of the titans of technical analysis in the early twentieth century. This strategy works best to predict the direction of the future market with only the analysis of price, time, and volume.
Is this strategy still valid today? Yes, many successful institutional and professional traders use this strategy. You must now be wondering how to use Wyckoff Strategy in 2021? Read on to find out.
Why Should You Use Wyckoff Strategy in 2021?
Richard D. Wyckoff used his technical analysis to frame the Wyckoff strategy in the early 20th century. You can, however, use this strategy in 2021 to choose the winning stocks.
The Wyckoff strategy will let you know the best time in 2021 to buy stocks. For this, you need to know how to use Wyckoff Strategy in 2021 for your maximum advantage. You will also have the most efficient risk management by applying this strategy.
Through the Wyckoff strategy, you can outline the key elements of the trend development in 2021. The Wyckoff Market Cycle has four phases: accumulation, markup, followed by distribution, and markdown.
By applying the Wyckoff strategy, you can easily identify the trends in the 2021 market. This strategy helps you to identify the direction of the overall market. It ups your game, and you can win big in the stock market.
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Using Wyckoff Strategy in 2021
The Wyckoff strategy consists of five steps of market analysis. This approach helps you make the right decisions for stock selection. The following Wyckoff rules will let you know how to use Wyckoff Strategy in 2021:
Wyckoff’s first rule is to determine the current position and possible future trends of the market. You need to ask yourself if the market is trending or consolidating in 2021.
Next, analyze the structure of the market, its supply, and demand. Does it point out the direction it will possibly take in the future? Based on such assessments, you need to decide if you should be in the market or not and which position to take.
This first rule tells you that the individual securities and the market do not behave in the same manner twice. You can use point-and-figure and bar charts to find out the market index for 2021.
You will get a better understanding of the current structure of supply and demand. It will then allow you to predict the price trends of the future.
The second rule of the Wyckoff strategy is to choose the stocks that follow the trend in the market. You have to pick the stocks that are uptrend and stronger in comparison to the market in 2021.
During a downtrend, however, do the opposite. Pick the stocks that are weaker in comparison to the market in 2021. You can make this comparison by using bar charts of the stocks and the relevant market index.
This strategy can help you get higher returns than the 2021 market. This method will allow you to gain profits in both the bear and bull trading markets.
By applying Wyckoff’s second rule in 2021, you can evaluate the stock prices in the market, and compare the previous market trends. It will then help you to pick the most profitable stocks.
The third rule is to choose stocks in consideration of the price target you desire. It must be equal to or exceed your minimum objectives.
Wyckoff used a unique method for trade management and selection. He recommends identifying price targets through Point and Figure projections (P&F). You can use this method for both long and short trades in 2021.
According to the cause-and-effect law, you need to make your trades only when there is sufficient cause that triggers an effect.
If you intend to choose long positions, pick the stocks that are under re-accumulation or accumulation. These stocks must have a significant cause that satisfies your minimum objectives.
Wyckoff’s fourth rule is to determine when a stock is ready to move. You need to apply the standard nine tests for selling or buying. This method helps you to determine whether it is worth to buy or sell a stock.
You need to rank the stocks that you are interested in investing in 2021. Rank them according to your preference.
You can then use point-and-figure and bar charts of each stock of your list. Apply the nine tests for selling or buying for each of the stocks in your wish list.
By using this method, you will get a better understanding of the market supply and demands. You can accordingly invest in the right stocks in 2021.
The fifth rule is to make your trade during the peak of the market cycles. You can improve the chances of a profitable trade in 2021 with this strategy.
You need to anticipate the possible turns in the market. It includes the changes in the price action of stocks. It is helpful to know when stocks will likely climb or drop in the market.
You need to time your investment as the market index turns. Then, place your stop-loss and follow up. You need to do this appropriately till you close out a market position.
You can make use of bar charts for this method. By knowing when the stocks will rise and fall in this way, you can get a good return for your money in 2021.
The Wyckoff strategy is followed by many successful professional and institutional traders. The recurring success of this strategy can be credited to its applicability to all time frames in every free trade market.
Now that you know how to use Wyckoff Strategy in 2021, you can predict the changes in stock prices in the market in 2021. By observing the trends in charts and previous price patterns, you can know whether to buy or sell stocks.
By using the Wyckoff strategy in 2021, you will have an edge in trading!