In the wheat pit of the Board of Trade of the city of ...weasel/Tradepages/Wyckoff Stock Trading Method... · In the wheat pit of the Board of Trade of the city of Chicago, 1920

Library Of Congress

In the wheat pit of the Board of Trade of the city of Chicago, 1920.

MATTHEW BOESLER

MAR. 19, 2014, 6:24 PM

"The large

operator does not,

as a rule, go into

a campaign

unless he sees in

prospect a

movement of

from 10 to 50

points. Livermore

once told me he

never touched

anything unless

there were at

least 10 points in

it according to his

calculations."

So writes Richard Wyckoff, the legendary trader who in the 1930s wrote a manifesto that

gained him a cult following on Wall Street.

His 1931 book, "The Richard D. Wyckoff Method of Trading and Investing in Stocks – A

Course of Instruction in Stock Market Science and Technique," is out of print and somewhat

difficult to find these days (not impossible), but even in 2014, hedge fund managers still

swear by it.

The Richard Wyckoff Stock Trading Method - Business Insider http://www.businessinsider.com/the-richard-wyckoff-stock-trading-meth...

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flickr / MSVG

One of the key takeaways from the book is that if you want to succeed, you have to learn to

recognize the professionals and understand what they are doing. That's what those who

follow Wyckoff do — they watch the large operators.

Wyckoff walks us through the process of how a large operator will manipulate a stock up or

down — so that next time one sees it unfolding on the screen before his or her own eyes, he

or she can react accordingly.

This, you could say, is real technical analysis ...

Wyckoff writes, "When you have

learned to take a wholly impartial

viewpoint, unbiased by news,

gossip, opinions and your own

prejudices, you will realize that the

stock market is like any other

merchandising business.

"Those who understand it buy only

when prices are low with the idea of

selling when they are high; and they

operate only in the stocks or

commodities which they can move

best so they may secure the

highest possible rate of turnover

of inventories."

Source: Wyckoff (1937)


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AP

"The preparation of an importantmove in the market takes aconsiderable time. A large operatoror investor acting singly cannotoften, in a single day's session, buy25,000 to 100,000 shares of stockwithout putting the price up toomuch. Instead, he takes days,weeks or months in which toaccumulate his line in one or manystocks."



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"He prefers to do this while themarket is weak, dull, inactive anddepressed. To the extent that theyare able, he, and the other interestswith whom he works, bring aboutthe very conditions which are mostfavorable for accumulation of stocksat low prices...

"When he wishes to accumulatea line, he raids the market for thatstock, makes it look very weak,and gives it the appearance ofheavy liquidation by sending inselling orders through a greatnumber of brokers."



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Barron's

Remember the saying, "Buy therumor, sell the news"?

"You have often noticed that a stockwill sell at the highest price formany months on the very day whena stock dividend, or some verybullish news, appears in print. Thisis not mere accident.

The whole move is manufactured.Its purpose is to make money forinside interests — those who areoperating in the stock in a large way.And this can only be done byfooling the public, or by inducingthe public to fool themselves."



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www.youtube.com



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Wyckoff (1937)



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Wyckoff (1937)

"Then he forces the price down to around 30 by offering large amounts of stock and inducing floortraders and other people to sell their long holdings or go short because the stock looks weak. Byputting the price down, he may sell 10,000 shares and buy 20,000; hence he has 10,000 shares longat the lower prices of his range of accumulation.

"By keeping the stock low and depressed, he discourages other people from buying it and inducesmore short selling. He may, by various means, spread bearish reports on the stock. All this helps himto buy. When he is thus buying and selling to accumulate, he necessarily causes the price to move

up and down, forming the familiar trading ranges, or congestion areas, which appear frequently on

figure charts."



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Wykcoff (1937)

"Finally he completes his line. The stock now stands at 35, and, as he has absorbed 50,000 shares

below that figure and other operators have observed his accumulation and have taken on considerable

lines for themselves, the floating supply of the stock below 35 is greatly reduced. At 36 the stock is

prepared for the 'mark-up.' It is ready to go up as soon as he is willing to allow it."



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Wyckoff (1937)



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Boiler Room trailer via YouTube

"The process of distributing callsfor much publicity so that theattention of the public will beattracted to the stock. The rise to50 started a whole crop of rumors.Brokers who are close to thebankers or the management of thecompany have been trying to findout what is going on to make thestock so strong.

"Insiders have hinted vaguely that'something good is coming out,' andwithout knowing just what thisexpected favorable news is, thebrokers have put their clients into it.Considerable outside publicfollowing has been gained duringthe rise. The market for the stock is broadening."



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D-Mark / Flickr



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Wyckoff (1937)

"After this the price may recede a few points, but he, having sold a large part of his line, is willing totake a small percentage of it back at 57 to 56, and after this has been accomplished, and the activityhas quieted down, he will mark the price up to 60 or 61 again.

"At that point he either turns seller, and markets the balance of his stock on the way down; or he

works it up and down in a range of a few points from the top, till he has completed his selling."



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YouTube / ETRADE Commercials

"The operator has now disposed ofhis entire line, and as the news isnow known to the public and manypeople have bought and thus takenthe stock off his hands, the stockmay be regarded as technically in aweak position, for it is in what iscalled 'weak hands.'

"By this I mean it is held mostly bythose who have bought at the top ofa 30 point rise, when the news wasbullish; most of these purchasesbeing made on margin, theholders can be shaken out or tiredout."



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Shutterstock

"The operator now sees a chance tomake a turn on the short side, sowhile the market is in this range ofsay 56 to 60, and after he hascompleted selling his long line, hesells short, say 25,000 shares.

"In doing this he makes the stockswing back and forth over thisrange, keeping good-sizedsupporting orders in around 56 tofool the floor traders, the specialistsand the public, who see on the floorand on the tape evidence of hissupport on the reactions. Thus theyare led to believe the stock is goingstill higher."



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Wyckoff (1937)

"When the operator has sold all of his 25,000 shares short, he cancels all of his buying orders. Thespecialist in the stock then tells some of the more important floor traders that the stock is in a weak

technical position and that there is no support for the next 8 or 10 points and they all get together

and raid it down to 50, at which point the operator covers his shorts."



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REUTERS/Jessica Rinaldi

Jeffrey Gundlach

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In the wheat pit of the Board of Trade of the city of ...weasel/Tradepages/Wyckoff Stock Trading Method... · In the wheat pit of the Board of Trade of the city of Chicago, 1920