welcome back to the channel in today's video we're going to be talking about wyckoff theory accumulation and distribution but we're going to be simplifying it massively and showing you how i personally bring these concepts into my trading just before we get into the video i wanted to let you know i have a free 13-part video course that you can sign up for now if you head over to the link in the description and drop your email in here you'll be sent a link that takes you to a 13 part course on risk management technical analysis
and trading psychology wyckoff theory is a market theory presented by richard wyckoff long long ago in the early 1900s it was basically a method that looks at the psychology behind trading movements and works out where the market is likely to go the wyckoff theory actually has four main phases these are accumulation which is a bullish range like this distribution which is a bearish range very similar to this but on its head and then mark up and mark down the theory suggests that the market moves from one phase to the other continually we have markdown which
is a downside move followed by an accumulation area where buyers are accumulating orders then we have a phase of mark up where the buying pressure takes hold and takes control and moves us back up and then we hear another phase of distribution now i believe this theory was initially created for the stock market but it does also work in currencies and it's a very sound theory to the point that it actually still works today even you know potentially near 100 years on i don't know the exact years but um we are very very far away
from the conception of wyckoff theory and it still remains true in the markets today now the problem that i have with work off theory and a lot of people message me and ask me if i use workout theory and i say no and the reason being and the reason i have such a problem with it is because it's so over complicated now the theory stands true the accumulation happens the distribution happens the markup happens and the markdown happens and you can actually learn these schematics and trade them but the problem is i just don't think
there is any need to learn all of this because trying to see this in a live market is very very difficult and a lot of the times you're going to get caught up seeing things earlier than they happen so for example you may see this as a spring as the final phase of an accumulation schematic you end up buying in and then you lose and you have to try and work out the schematic again or you have it all plotted out and then something changes and you have to replot it all so it's very discretionary
and it's difficult to actually see these schematics until after they've happened however the concepts with liquidity and the concept of accumulation distribution markup and markdown are 100 solid and sound and what you can learn to master this strategy i believe that it's over complicated you don't need to do that and it's actually going to lead you to a very long journey in trading that you kind of really don't really need to go down so what i'm going to do in this video is show my view of why cough accumulation and distribution and how i actually
use those concepts in my trading i'm going to show you some live examples on the chart of these theories in action i'm going to first of all run through the accumulation and distribution schematics and then i'm going to show you what i do differently to keep things simple while still taking advantage of this very true concept so we're going to start off this video by breaking down the standard wyckoff schematics and i'm going to show you what this exactly shows and what each of these different things mean now in richard wyckoff's basic theory we see
the market move from markdown to accumulation to markup to distribution to markdown and so on and so on markdown is basically a bearish impulsive move a downtrending movement and the accumulation schematic happens when the pressure of the markdown actually leaves the market so the market is a constant battle between buyers and sellers when the sellers are in control prices go down when the buyers take control prices go up we can see here it's showing an area where the sellers are losing the control and the buyers are gaining it so the step one is markdown we
see the bearish move coming to a close the first point that we want to focus on is a preliminary support and then after the preliminary support we get a selling climax and what this shows is the end of this selling pressure this is where sellers are taking profit and also potentially where buyers are beginning to accumulate some orders so what we get after the selling climax is what we call an automatic rally this is where the sellers are taking the profits here and we see a sharp upward move because when those sellers are actually closing
positions they're essentially buying back so this is the first point we see a lot of strength come into the market and we get this automatic rally from there the market will generally form a higher low this is known as a secondary test and then we start to move upwards to clear out the liquidity of the automatic rally and then we move all the way down to clear out the liquidity of the secondary test and that selling climax low this is a secondary test in phase b the market has a few different phases for wyckoff accumulation
and distribution phase b begins after that secondary test and after that push to the upside there from that secondary test we begin to move back up we failed to make a higher high over the previous one which shows us that we are really ranging and there is buy orders accumulating and also sell orders selling off we trade through the liquidity of a few of these levels a few times before finally coming through for a spring a spring is what some people see as a stop-loss hunt or a liquidity run this is just a final movement
that pushes through the lows of the secondary test and the selling climax low to clear out the liquidity collect more buy orders and then from there that is where the market really begins making its movement first of all we get a test like this where the market comes out of the spring and then when we start to take off we have a last point of support and then a sign of strength the sign of strength is where the buyers have taken control and broken out of the highs of the range after coming and sweeping out
the lows of the range and from here we can actually then look to buy from that last point of support in phase d now from here the we enter phase e which is a markup pattern and from there we are going to move into a distribution schematic a distribution is exactly the same thing but flipped on its head instead of having a selling climax we have a buy-in climax and aside from that everything works exactly the same but the other way around until we get a sign of weakness and then we enter a phase of
mark down so that is the basic concept of wycopt schematics as you can see it looks very good on paper um and it does work out in real life but the problem is it can be very very very tricky to actually see this in the market while it's playing out if you go back and look at the market you will see this happen a few times but trying to do it before it happens we're trying to work out while it's happening is quite a difficult task for that reason i think that accumulation and distribution is
quite over complicated and while i do stand with the concept of the market phases markdown accumulation markup and distribution i personally don't use these schematics in my trading at the time of writing and i probably never will i have a system that works for me which follows these kind of concepts but doesn't use these tricky schematics so what i'm going to do now is talk about my use of the wyckoff theory and where i begin to bring markdown accumulation distribution and markup in to my personal trading so here's a brief look at how i may
see an accumulation schematic in the market what i generally look for in my own trading is price and price structure higher highs higher lows supply and demand liquidity all of these basic things that we can turn into a system now i have a step-by-step system that i use in all my trades and it does use those concepts structure and supply and demand being the top main two so as usual i will see the markdown phase pretty much in the same way as a you know a solid white of schematic trader the difference is when we
hit the end of that i'm actually not looking for some crazy schematic all i'm looking to do is follow the market structure and the momentum of the market as well so there's two big considerations and it's going to be structure and momentum now if we remember what wyckoff is actually trying to present it's trying to present an area where the sellers are leaving the market and the buyers are entering the market so if we want to identify that area we need to see an area that momentum is lacking and momentum is actually drying out when
we see a clear downtrend with lower lows and lower highs consistently moving in a very impulsive fashion this is 100 a phase of markdown but when the market then starts moving sideways even if we are ever so slightly forming lower lows and lower highs we actually see the momentum is drying out of the market so what does that tell us well that actually tells us what a wyckof schematic tells us tells us that the sellers from these moves are taking their profits and buyers are beginning to accumulate their own orders to actually take the market
the other way we see that form like so where the market begins to lose speed and actually trade sideways and then what i'll be looking for generally is a trade into a demand zone or a supply zone now this is how i trade wyckoff obviously not all the time the accumulation or distribution schematic is going to trade into a supplier demand zone but if it doesn't i personally won't trade it like i said i'm simplifying my work off here and this is just how i bring the concepts into my own personal trading so as you
can see what i'm trying to see is just the market action and what's actually happening in the market in terms of the battle between buyers and sellers using of course structure and using the supply and demand in my trading so rather than trying to work out a picky schematic and trying to draw every single bit on directly i'll actually just look for areas where the momentum is drying out of downside moves and then i'll begin considering things like the sweeps of liquidity so when we see a markdown move coming to a close we are generally
going to see the momentum dry out but the market may still be forming these slightly lower lows and lower highs what i personally want to see is the market trade into an area of interest like a supply or demand zone and then make a large move up what this shows me is the sellers are beginning to lose the market we do have buyers accumulating but we're also going to have retail buyers who are buying in these lows above demand or below supply zones and these guys are also going to get swept out to build the
liquidity for the large orders we know the large orders are the orders that move the market so for large orders to be triggered the buyers that are coming in here need to be swept out so their stops can be triggered to allow for those large large orders to be put on so i'm looking towards high interest buying and selling points demand zones and supply zones namely and when we trade into those and get a large impulse up that's going to break some previous structure and this break of structure paired with the low momentum of the
downside move and also paired with a trade into a high interest area like demand or supply and if we bring into it the liquidity as well where we've broken beneath the buying areas here that is going to show me that we're in a good position to actually start moving to the upside so rather than using a tricky schematic i am looking for a step-by-step process first of all i want to see momentum leave the market which shows me sellers are closing out and buyers are entering the market after that i'm going to want to see
the market trade into a high interest area like a supply zone or a demand zone and from there i'm going to want to see the structure broken to the upside which is going to confirm to me that these sellers here and these sellers here have now been overpowered by the buyers who have the power to bring the market through those highs schematics not always going to look identical because i'm not actually following a schematic i'm just following those concepts i spoke about sometimes we may get a very clear range like this other times we are
going to get you know slow downside action like this sometimes we may even have messy lows in the market here but basically what i'm looking for is the point that the momentum is clearly leaving the market and then the area where the buyers are clearly taking control which is usually going to happen from a demand zone and in a sell side opportunity the sellers are going to take control from a supply zone so as you can see my way is much more simple than actually following those workout schematics and i'm not saying you shouldn't and
i'm not saying that why crop trading is bad but what i am saying is you can actually simplify it and still use the processes to your advantage we do get markup we do get accumulation we do get distribution and we do get marked down but there is no reason that you need to go and dig into the whole schematics like this and confuse yourself when you could just focus on simple concepts like market structure momentum and of course the liquidity sweeps and supply and demand that we get in these kind of formations so if you
are looking to bring the concept of wyckoff theory into your trading but you find them very confusing and you are not interested in actually learning full schematics when you don't really need to you could actually begin to look at the markets like this keep in mind accumulation distribution markup and markdown because they are very important concepts to understand and if you understand them you can trade through the market cycles of buyers strength and seller strength but bring it in line with other things that also bring a lot of logic and simplify the process namely market
structure and supply and demand now let's head over to the chart and i'll show you a few examples of how i would view work off theory on a chart which is much more simple than what schematic traders may be looking for after that next markdown phase the market begins trading sideways as we can see here which indicates to us that there is no momentum in this market telling us that the selling may be done and what we can actually do from here is first of all indicate the low of this buying area and we can
wait and see if we are going to sweep that low to collect those final buy orders we could then begin looking for some form of buy now as we see we do get a nice sweep obviously at this point nothing is confirmed no action should be taken but if we then break structure that's going to suggest to us that the market is ready to move to the upside so when we see a push of the structure like this we can look towards the zone that broke structure being this area here and we can actually look
to buy from this area so if we got a buy tool on for example drop that on the chart stop less under the low target into some highs you know usually using uh supplier demand zones when the market pulls back we get a nice tap in and the market makes a very very nice run so that is a markup phase there out of the back of this accumulation and you can see how the accumulation and distribution occurs time and time again we are simply following the accumulation of buy orders through the upside phases and then
the distribution of sell orders through the downside phases back and forth back and forth and allowing the market to do its thing only getting in when we start to see that momentum run out so after this markup phase what do we see here well we first of all see the price action going very flat showing us here that we do indeed have a lot of selling pressure coming in and the buyers from this move are actually exiting the market we see that the buyers lose their strength the market moves sideways we get that sweep known
as the spring in an accumulation schematic and then when the market sells off and pushes through some of these structural low points we can actually then look towards some of the supply zones in the top focusing on imbalanced supply areas to actually prep a setup so as an example if we were selling in from here targeting you know somewhere back down into this zone for example we may indeed get a very nice entry but we only go for the entry after we have confirmation from the momentum and also after we have confirmation from the market
structure as well and that is a clear indication of the markup markdown accumulation and distribution schematics that i use personally with structure momentum and supply and demand in my own personal trading and we use the same concepts but we have simplified it to our own process or my own process that allows me to understand the concepts of accumulation and distribution understand the battle between buyers and sellers without having to break my system and without having to dig deep into a over-confusing and over-complicated system and that brings us to the end of the video i hope
you've learned a thing or two here if you were looking to get into wyckoff trading i do not want to put you off but i've just presented to you what you could do instead if you understand and you agree that maybe wyckoff is a little bit overcomplicated and maybe you don't need to learn all of these confusing schematics that are very difficult to track and trade in real time if you want to go ahead with wyckoff do go ahead the system is very good the logic behind it is also very sound however i just think
simplifying it to my personal process like this is more effective for me so i hope you've enjoyed the video work off simplified i hope you've got a lesson or two to take away now if you do want to dig deep into my trading strategy and learn how i trade my entire step-by-step system i have a black friday sale running now there is 30 off my academy and that is a lifetime access package so head over to the link in the description below the free course but more importantly than all of that i just hope you
found a lot of value in this video and i hope that you can put some of this to work and maybe save yourself quite a lot of confusion on the wyckoff theory so thanks for watching and i'll see you on monday with a new analysis video
