A methodology developed by Richard Wyckoff describing how institutional traders accumulate positions before markup phases.
Deep Dive
Wyckoff Accumulation is a market phase identified by Richard Wyckoff where institutional traders build large long positions before a significant price increase. This phase occurs at the bottom of downtrends and follows a predictable structure with specific events.
Key phases include: Preliminary Support (PS) and Selling Climax (SC) where heavy selling is absorbed, Automatic Rally (AR) and Secondary Test (ST) where the range is established, Spring or Shakeout where price briefly breaks below support to trigger stops and test for remaining supply, and Sign of Strength (SOS) where price breaks above resistance beginning the markup.
Understanding Wyckoff Accumulation helps traders identify major bottoms before they're obvious. The Spring pattern, in particular, offers excellent risk-to-reward entries as it marks the final shakeout before institutional buying drives price higher.
Why It Matters
Understanding accumulation patterns helps identify major market bottoms and early trend entries.
Related Terms
- Accumulation — A phase where institutional investors gradually buy an asset before a significant price increase
- Distribution — A phase where institutional investors gradually sell an asset before a significant price decline
- Selling Climax — High volume panic selling at market bottoms signaling exhaustion
- Spring — A false breakdown below support designed to trap sellers before a reversal higher