Trading Wyckoff Springs

Trading Wyckoff Springs

We love trading Wyckoff Springs.  In the right market context, they are my ‘bread & butter’ trades.

Wyckoff Springs graphically represent a stark imbalance in the supply – demand equation always operating in the market.  After reaching a low, as at A, the market rallies and then returns to the ‘scene of supply’ by revisiting that area on a push back down.  But it’s not just a simple test where price reaches the low recorded earlier and bounces off.  A Wyckoff Spring is different.

In trading the Wyckoff Spring, we look for price to penetrate the recent low by a little bit, and then quickly reverse.  It’s can’t stay under the last swing lows (A) because there is no supply to keep it there.  Demand, or buying, forces price back up and through the last swing low.  If there is no selling, demand will enter and the market will rally.

And that’s our entry, as depicted on the 5-minute chart.  A few bars later, the market comes back to test and make double-dog sure there is no longer supply in this area.

Wyckoff Springs occur frequently in the markets, and they occur across all time frames.  If you are a day-trader, you can concentrate on only trading Wyckoff Springs across 2-3 markets and you would likely find yourself doing well at the end of the trading week.  Swing Traders can do the same by tracking a dozen or so markets.

But not just any spring is a good trade.  Market context is important.  Here we see the hourly chart showing the decline over the last day and a half becoming oversold.  We also see buying developing on the 60-minute chart.  Members of Deep Practice–our weekly training program for traders–know the importance of this higher time frame in setting the context for day trading throughout the trading day.  This tells us well in advance that we want to pay good attention to the market if and when it revisits this area.