How to trade SD at the best by the wyckoff method

9/25/2018

Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

GIROLAMO ALOE

How to Trade Supply and Demand at the Best by the
Powerful Wyckoff Trading Method
by Girolamo Aloe in Trading ( />
( />How to Trade Supply and Demand at the Best by the Powerful Wyckoff Trading Method

What is behind the Wyckoff Trading Method and the Supply and Demand willing? Why do the
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Supply and Demand Imbalances de ne the price moving? Besides, why do they rule the price


Let me show the
hing


When you analyz
 e ing and how it reacts
converging to big orders. In the same way, you recognize where the price is going. So you
 that it takes and how the moving happens. Besides, you understand the
see the direction
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consolidation and the trend? Many people don’t know about the real structure of13the Markets.
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role that a Price Consolidation has in all this Indeed you see how the institutional
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9/25/2018

Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

role that a Price Consolidation has in all this. Indeed, you see how the institutional
investors work into the Range of Consolidation.
Describe all this, describe also how I trade and invest in Stocks and Bonds so as in Forex
and Futures. I have not to look for perfection to get my pro ts. But I need to have clear
the Structure of the Markets where I invest. Then, I need to understand what rules the
Price Range of Consolidation and the Trend Rotation. Then, why the price moves in a
speci c way. Besides, I have to understand why it spikes up or down and how it is running.
The Supply and Demand Imbalances shows how Big Block Orders act. The Wyckoff
Trading Principles are the root of any Stock market technique. In the same way, it is so for
any other marketplace: Forex, Futures, Bonds and much more.
Every marketplace, Liquid or Non-Liquid, is the result of Orders that move the price.

Even if I earn in a constant way for the long-term, my learning process never ends. What I
do with the Students of Pro ting.Me (https://pro ting.me/) is sharing with them my
Trading Practice. Then they see the practical applications of my knowledge and
experience.

How Big Investors take their Block Trades
Block Order

“

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A Tradable Financial Asset is a Security. W
hen Institutions or Traders set a Buy or Sell





A large number of Securities is an amount of shares that is very high. For Penny Stocks

Traders 10.000 could seem like a very big amount of shares. On Liquid Markets,
engage 100.000 shares as a starting point. Later, they can increase their
Institutions can
Block Order, t(h?share=facebook&nb=1)

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exposure taking more shares I am talking about hundreds of thousands of dollars so as
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9/25/2018

Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

exposure taking more shares. I am talking about hundreds of thousands of dollars so as
several millions of dollars on Orders ( />
“

The Wyckoff Trading Method so as Supply and Demand Imbalances are all around
Block Orders and Block Trades.

Block Trade

“

These Big Orders, that are Blocks of Securities, create Block Trades.

Involving a big number Securities, such Bulk of Trades can move the market in a

consistent way. This is possible by the rising of the volume of negotiations.
It is almost impossible for a simple retail trader to trade such big sizes. Indeed, It is a
prerogative of Hedge Funds and Institutional Investors. They inject a large amount of
money to the market by Intermediaries so as Investment Banks.

Block House

“

A Block House is a particular brokerage rm that is speci c for large trades, charging
high fees to the Investors.
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It manages the big investments for Pension Funds, Academic Funds, Corporations, Banks
to Insurance, and
m

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It gives severalser levant is that a Block House trades the Big Block Orders in a
careful way.
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A Block House can manage the money with the focus on these points
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9/25/2018

Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

A Block House can manage the money with the focus on these points:
1. It manages the investment avoiding to induce high volatility to the market.
2. Keeping relations with brokers, it split the Block Order to different brokers.
3. It can inject the money into the market increasing the exposure in a gradual way
looking to push the price.
4. Even if the Investor decides the Order Price, it looks for the best deal for trades.

“

A Block House has skills and relations to manage, in an easy way, orders of a big number
of Securities.

In the modern age of Trading and Investing, the Block House seems like a broker with a
direct account manager. The difference is that the Block House manages Millions of
Dollars per trade. It is possible because the authority legitimises the Block House to get
the necessary specialization to do it.

How the Block House manages Block Orders and Block Trades

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9/25/2018

Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

( />Wyckoff Trading Method – Block Orders

Institutional Investors, Hedge Funds or Moneyed Traders ask help to their Block Houses.
They know that the Block House will manage their investments in the best way to get the
best deals. The Investor asks for an entry price. But the Block House can make a deal for
better entries with the Investors and with the brokers.

“

The Block House makes deals with brokers that are speci c for the marketplace.
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



The splitting in chunks lets manage the trading of a lot of securities. It could be dif cult or

impossible to trade a big number of Securities with only one broker. It is so because of the
the broker limits. Besides, smaller blocks keep a low volatility.
regulations and
The Block House splits the Block Order is smaller blocks to trade with different brokers.
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9/25/2018

Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

For short trades, the dif culty is bigger because the shares to short are fewer. Then, it is
necessary to borrow them at the right time. This happens although big investors and their
Block Houses have special privileges.

Expensive Execution Costs of the Block Trade
There is a particular problem in this process. It is how much a trade costs. The splitting of
a Block Order in Block Trades can become expensive. The brokers charge a cost per trade
and they can have different commissions. Then, a bulk of trades has an executions cost
that depends on the number of trades to open.
This means that for Block Orders in a marketplace, the Block House has to limit the
number or trades. In the same way, it has to limit the number of brokers and trading
routes to execute the Block Trades.

Supply and Demand Disparity by the Block Trade
Get or Liquidate a big number of Securities causes strong Imbalances in the market.

These actions affect the Supply and Demand willing around the Price in the market.

“

The Block House works to manage and cut the effect on the market of the Supply and
Demand Disparity.

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

The necessity to contain the volatility( ?share=facebook&nb=1)
by the Block House could sound strange. Indeed, it

is very strange that Market Makers need to contain the volatility that they 1c3an cause. But

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9/25/2018

Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

Any Market Maker, like a Hedge Fund, de nes a Safety Target Price. This price is a
safeguard for the interests of investors. A Hedge Fund can earn a lot of money, taking
acceptable risks. It doesn’t need to charge the fund with the most of the unnecessary
risks. The safeguard price is a good average price that the current market can reach. The
Block House avoid that the Imbalance pushes the price away from the safety target.
The Wyckoff Trading Method, with the Trading Volume, exploits the Supply Demand
Disparity. Besides, it shows the effect of Block Trades that the Block Houses execute in a
Time Interval. So, in a Price Consolidation, the Wyckoff Trading Method shows how the
Block Trades affect the market.

“

When the Block House executes a Large Block Order, it gives a direction to the price
behavior.

So, the price can rise or drop marking a trend. This favors the trading of the retail traders.
Indeed, the retailers can run for low-risk trades looking for the Institutional Investors
Orders.

The Theory of the Composite Man to explain How the
price moves
According to Wyckoff Stock Market Institute, Richard Demille Wyckoff was a Trading
Authority. He was born 1873 and he was a trader and educator in stock, commodity and
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bond markets.


As a Stock Marke
 t A is way, he de ned the
Wyckoff method of trading and investing in stocks.

The Wyckoff
Traing large numbers or Securities.Richard Wyckoff
 introduced the conce
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pwt yockf otffhtera“diCngo-m
oosdi/t?sehar
Mea=pni”ntoerre“stC&n
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He wrote
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9/25/2018

Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

He wrote:

“

…all the uctuations in the market and in all the various stocks should be studied as if
they were the result of one man’s operations. Let us call him the Composite Man,… –
Richard Wyckoff

He means that it is not relevant if what moves the market is an Institutional Investors or
others. What is relevant is the impact that the trading of a large amount of Securities has
in the market.
So, if you understand how the “Composite Man” moves the market you get a great
advantage by low-risk trades.

“

The Composite Man is a tool to understand how the price moves.

How to go inside the mind of the Composite Man

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


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
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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

( />Wyckoff Trading Method – The Composite Man accumulates Securities

Why is so important to go inside the “mind” of the Composite Man?
The Composite Man does his Trading Job in every time and better than any other. Then,
you have to learn his behaviors and his actions following what he does.
What is clear to everybody is that the market doesn’t move by itself. In the Price
Consolidation, the Composite Man takes or liquids Securities in a gradual way. When this
number of securities is high enough, the market runs out of the price range of uncertainty.
This means that in a Demand Level, his Trades add more Securities in his portfolio. Then,
he is Accumulating Securities. Instead, in a Supply Level, his Trades cut the numbers of
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Securities he owns. Then, the Composite Operator is Distributing Securities to the



“ The Composite Man represents the joint action of the Market Makers.


Studying and Practicing you get skills to see and master what moves the market. In the

same way, you understand who moves the price.

Market.

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In a Liquid Market like Forex the Events in the Economic Calendar are not the cause that
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9/25/2018

Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

In a Liquid Market like Forex, the Events in the Economic Calendar are not the cause that
moves the market ( Their
action is very small and it doesn’t affect the market trend. Studying and Observing the
Forex Market time by time, you realize that this is so.

( />Wyckoff Trading Method – The Composite Man distributes Securities

Accumulation, Distribution, and Trend, in Supply and
Demand
ns:alysis of the Imbalances is what rewards
I am a Supply and Demand Trader. A detailSheardeathi



All this is possible studying the price action with dedication for the long-term. Everything
 ar s puts the trader in the condition tohave skills and experie
comes from a cle
nce to set orders days and weeks in advance.The Wyckoff Tra
 ding Method takes
me day by day. M(y ?share=facebook&nb=1)

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The Trading Volume is very important on Non-Liquid Marketplaces like Low Price Stocks
(http //www girolamoaloe com/forex trading strategies/) Indeed the Volume of
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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

( Indeed, the Volume of
Negotiations on Stocks is a good thing to know. It helps to make a good watch list and to
understand what is going to move.
Besides, the Wyckoff strategies and techniques show the right time to open a trade. This
happens according to the price behavior in a range of consolidation.

“

When the price action shows uncertainty, the best entry is at the origin of the new trend
momentum.

It is the Imbalance that pushes the price away from the price range of uncertainty. It could
not be the last imbalance in the price range. But it is the imbalance that begins a new
trend so as that spikes the price out of the uncertainty.

Wyckoff Market Cycle

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


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 ro 7/02/170227-Wyckoff-TradingMethod-Wyckoff-Price-Cycle.png)

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Wyckoff Trading Method – Wyckoff Price Cycle

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These are the famous Supply and Demand Trading Patterns for the Trend Rotation:
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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

These are the famous Supply and Demand Trading Patterns for the Trend Rotation:
Rally – Base – Drop.
Drop – Base – Rally.
They are almost one of the rst thing that every Supply and Demand Trader learns
( table-forex-strategy/). In reality, the way which the
price changes the trend shows different peculiarities.
So, these Reversal Patterns becomes very indicative. The reason is that they show the
reaction at the end of the Price Progression that marks a Consolidation. But they don’t
care and don’t explain the Process that change the Trend.

“

The Wyckoff Trading Method shows the peculiarities of the Trend Rotation.

Doing this, it gives a way to recognize the different Trading Rotation Frameworks.
Besides, it shows how the Composite Man works. He Buys or Sells, accumulating or
distributing securities. So, when the securities in accumulation prevail the price starts a
rally in a markup. In the same way, when the securities in distribution prevail the price
drops in a markdown.

“

The key elements of the price changing de ne the Wyckoff Market Cycle or Wyckoff
Price Cycle.

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
The Market develod Accumulation and Supply

Distribution.

In this way, you
 u es in the price behavior.The Wyckoff Tra
 ding Method shows the
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syeckpohff-tarsaedisngto
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1. Demand Accumulation.
2 Markup Trend

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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

2. Markup Trend.
3. Supply Distribution.
4. Markdown Trend.

Demand Accumulation and Supply Distribution in the Wyckoff
Trading Method
Supply and Demand Imbalances de ne everything in the market
( This is so because the lling of
Block Orders, and then the opening of Block Trades move the price.
The Wyckoff Method of technical analysis makes clear in the chart the lling of the Block
Orders. Then, you can get peaks with spikes, so as a gradual opening of Block Trades.
You see how Big Investors are gathering Securities in a Demand Accumulation. In the

same way, you see where and how they are liquidating Securities in a Supply Distribution.
The Demand Accumulation and the Supply Distribution are the Supply and Demand
Levels. They are Trading Ranges (or Trading Price Ranges).
So, now you understand the First and the most important of the Three Wyckoff Laws.

“

The Law of Supply Demand
Shaprleythi
When the demand willing exceeds the sup
ws:illing, the price rises. In the same way,


willing gives a direction to the market and rules the Wyckoff Market Cycle.


Persistent
Level and Imbalance in Opposition


when the supp( l ?ischa
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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

( />Wyckoff Trading Method – Imbalance in Opposition

When the price takes out a Demand Level, it marks a new and fresh Supply that is good
for trading. In the same way, the taking out of a Supply Level marks a new and fresh
Demand Imbalance.
This kind of Supply Demand Imbalance is in Opposition to a previous price behavior.
This means that an emerging Supply and Demand Disparity is prevailing. Then, in the
Price Range of a previous Imbalance, you can see the opening of new Block Trades. This
increases the Disparity counter the old Imbalance into its same Price Range so as around
it.
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Accumulating or Distributing enough Securities the emerging Imbalance spikes the price.



“ When a Used Supply or Demand Level makes bounce back the price many times, it is a


Persistent Level.

The strength of
thtill orders to execute. These
new and old orders are still enough to give a strong opposition when the price converges.

(
So, the price actio
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A Persistent Supply or Demand Level is common in a Trend Rotation
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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

A Persistent Supply or Demand Level is common in a Trend Rotation
( The Price Consolidation
shows many convergences to the same Supply or Demand Level. It is an edge of the Price
Consolidation.
The taking out of a Persistent Supply or Demand Level gives a Solid Trading Opportunity.
The reason is that it marks a concrete changing in the price behavior.
The new and fresh Imbalance in Opposition to the Persistent Level is a strong Imbalance.
In the most of the case, the Opposition doesn’t happen with only one imbalance. Inside
and around the Price Range, the Block Trades can mark even two (or more) Imbalances in
Opposition.

The Wyckoff Trading Method and Supply Demand
Uncertainty

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


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 ro 7/04/170401-Wyckoff-TradingMethod-Trading-Range.png)
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Wyckoff Trading Method – Trading Range

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The best way to use the concept of the Composite Operator is the Analysis of the Price
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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

The best way to use the concept of the Composite Operator is the Analysis of the Price
Range of Uncertainty.
A Price Consolidation becomes a Supply or Demand Level when the price spikes away
from it. You can recognize the edges of the Consolidation that de ne the Price Range.

“

A Trading Range is a clear Price Consolidation.

This exists because the Price behavior of the previous up or down trend changes. The
changing happens because the Supply Demand willing reaches an equilibrium.

“

The price moves around a Trading Range where the edges are Supply and Demand
Imbalances.

You see them moving to a lower time frame.
Indeed, the price action marks a Supply and a Demand that trap the price in a Trading
Range. Sometimes edges are clear, other times there is a pin bar with a long tale that
could confuse an edge.
Using the Composite Man, you can investigate what happens between these edges. What
you see is that the Composite Man is buying or selling. You see how and why he is taking
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or liquidating securities. He buys to accumulate securities so as he sells to distribute



The Wyckoff Trading Method lets you expect and analyze how the price is going to run
 So it can show in advance what would be the market direction out
out of the uncertainty.
of the Trading
Pr
“ According toth ding Range, you get Phases
and Events.

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securities.

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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

They are important because they are a way to recognize a set of Rotation Frameworks. In
the same way, they show where to set an order in advance.
Besides, they show why trade breakouts or breakdowns is not the right approach

( />
Wyckoff Phases in Demand Accumulation and Supply
Distribution

( />Share this:

Wyckoff Trading Method – Wyckoff Phases in Demand Accumulation


The Wyckoff Trading Method becomes a priceless resource to analyze the uncertainty in

a Price Consolidation.


Richard Wyckoff
 d is Phases. In this way, he is able to describe the work of the
Composite Man in the Trading Range.

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I explain this every day to the students of Pro ting Me (https //pro ting me/) I show
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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

I explain this every day to the students of Pro ting.Me (https://pro ting.me/). I show
them the advantage that they get dividing the trading range into phases.
Let me introduce you the Wyckoff Phases for a Trend Rotation:
A – Stopping of the Previous Trend.
B – Building a Cause in preparation for a new Trend.
C – Decisive test to understand if the market is ready to reverse the previous trend.
D – Dominance of Block Trades to reverse the previous trend.
E – The Effect of the Cause is the escape from the Trading Range, reversing the trend.
So, now you understand the Second of the Three Wyckoff Laws.

“

The Law of Cause and Effect
The Trading Range develops the cause for the Reversing of the Trend so as for the Trend
Continuation. Instead, the effect is the marking of a new trend or to continue the
previous trend.
The cause lets you estimate the Force of Accumulation so as the Force of Distribution in
a Trading Range. Then, you realize how this Force can extend an emerging trend out of
the Trading Range of Consolidation.

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
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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

( />Wyckoff Trading Method – Wyckoff Phases in Supply Distribution

The Crucial Role of the Wyckoff Phase C

“

The Phase C shows if the market is ready to reverse the previous trend. So, the
Composite Man tests the strength in opposition to the previous trend.

In a Demand Accumulation, the remaining supply willing pushes to the Buy Block Orders.
This means that it tries to continue the previous bearish trend.
In the same way, in the Supply Distribution, the remaining Demand willing pushes the
price up. So, it tries to overwhelm the Sell Block Orders to continue the previous bullish
trend.

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
 se d.
“ The Block Hou


If the market will continue the previous trend, you will see it in this phase. The Supply or

the Demand willing would overwhelm the Block Trades in opposition. So the price could
 the new Sell Block Orders will push it to continue the previous trend.
bounce back and
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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

In the same way, the Wyckoff Trading Method shows in Phase C if the market can reverse
the trend.
The testing of the Strength in opposition is a Convergence to a Supply or Demand level in
the Trading Range. Then, the price behavior is an imbalance that pushes the price back.
Besides, it is possible to get a spike back so as a pivot behind the distal line of the level.
So, these strong market reactions are a sign that the market could go to reverse the trend.

Signs of Dominance in Wyckoff Phase C
The Wyckoff Trading Method highlights some events that can occur in the Wyckoff Phase
C:

1. Terminal Shakeout and Spring.
2. Upthrust and Upthrust after Distribution.

Their presence is not necessary to reverse the trend. Indeed, they are not occurrences
that happen in every Trading Range of Consolidation. But when they occur, they give a
great advantage.
They are a Sign of Dominance for the Reversing of the Trend. Indeed, they make easier
the decision to trade anticipating the new trend.
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
Shakeout says that it is a dramatic change in the market. Speculators sell their positions.

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/sr/es=fhaacekbeoooku&n
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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

( nition-of-Shakeout.jpg)
Wyckoff Trading Method – NASDAQ De nition of Shakeout

Instead, the Investopedia ( de nition
of Shakeout says that many investors exit their positions.

( nition-of-Shakeout.jpg)
Wyckoff Trading Method – Investopedia De nition of Shakeout

What they say is visible in the chart in many ways.

“

What is relevant is the sharp movement to and throughout one edge of the Trading
Range.

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
the Strengthin o


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In the Wyckoff Phase C, Spring and Upthrust after Distribution are a de nitive
13 test of
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Many expert trad( e ?share=pinterest&nb=1)

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Upthrust after Distribution are signs that the trend could turn in the
Spring and
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opposite direction

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9/25/2018

Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

opposite direction.
They offer opportunities to trade catching the pro table bounce back, in the middle
of the Trading Range of Consolidation.

1 – Terminal Shakeout – Spring in Wyckoff Phase C

( />Wyckoff Trading Method – Wyckoff Phase C – Terminal Shakeout and Spring

In a Demand Accumulation, a Terminal Shakeout is a rapid depreciation. It makes
converge the price to the Bottom Demand Edge of the Trading Range. As a de nitive test
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of the Supply willing, it happens to prepare
the market for the markup.


the price behind the distal line of the Demand Edge and reverses its
“ The Spring takes

behavior.

This means that
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price inside the Trading Range. This can happen either by a gradual recovery or by a rapid

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recovery of the price.

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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

The Terminal Shakeout makes hit the stop of the buy trades. This affects more the public
action and then the retail traders. So, they have to disengage their securities favoring the
big investors to take them.
It puts the Large Interests in the condition to accumulate securities at a cheaper price.

( />Wyckoff Trading Method – Wyckoff Phase C – Spring

2 – Upthrust – Upthrust After Distribution
in Wyckoff Phase C
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
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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

( />Wyckoff Trading Method – Wyckoff Phase C – Upthrust after Distribution

In a Supply Distribution, an Upthrust is a clear rising of the price. It makes converge the
price to the Supply Edge of the Trading Range. As a de nitive test of the Demand willing,
it happens to prepare the market for the markdown.
If the price rises over the Supply Distribution it marks a High Pivot behind the distal line.

“

The Upthrust After Distribution takes the price behind the Distal Line of the Supply
Edge and reverses its behavior.

Then, it pushes the price back into the Trading Range by a gradual recovery or by a rapid
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recovery.


This gives a false

br l trades and Short trades. This
affects more the public action and then the retail traders that take wrong trades. So, this

favors the Big Investors to take advantage of the higher price before the drop.
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Wyckoff Trading Method: How to Trade Supply Demand - Girolamo Aloe

( />Wyckoff Trading Method – Wyckoff Phase C – Upthrust and Upthrust after Distribution

Some considerations about Wyckoff Phase C
1 – False Breakout and False Breakdown
The Spring is False Breakdown so as the Upthrust After Distribution is a False Breakout.
Indeed the Spring is a Bear Trap and the Upthrust After Distribution is a Bull Trap.
This means that there are retail traders that Buy on the breakout or sell on the
breakdown ( They lose money
because they think that the momentum is persisting in a direction. So they Buy high on a
this:
high pivot and sell low on a low pivot, bothShare
behind
the distal line.


2 – Buy on Sprin
 g stribution

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Consolidation. It is not reversing the trend. But it shows to you if the price is ready to

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reverse the trend or not.

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