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Through a Graph Darkly – Nine Buying/Selling Tests

Whereas the three Wyckoff laws provide a big-picture foundation for the Wyckoff method, the nine buying and selling tests are a set of narrower, specific principles to help guide trade entry. These tests help delineate when a trading range is drawing to a close and a new uptrend (markup) or downtrend (markdown) is about to begin. In other words, the nine tests define the line of least resistance in the market. Below is a listing of the nine buying tests and nine selling tests, including the references to which kind of chart should be used.

Like all tests, these can be adapted to suit an individual’s preference but they form a very useful checklist to keep at your disposal in order to make smarter decisions.

Wyckoff Buying Tests for Accumulation

  1. Downside price objective accomplished – P&F chart
  2. Preliminary support, selling climax, secondary test – Bar and P&F charts
  3. Activity bullish (volume increases on rallies and diminishes during reactions) – Bar chart
  4. Downward stride broken (that is, supply line or downtrend line penetrated) – Bar or P&F chart
  5. Higher lows – Bar or P&F chart
  6. Higher highs – Bar or P&F chart
  7. Stock stronger than the market (that is, stock more responsive on rallies and more resistant to reactions than the market index) – Bar chart
  8. Base forming (horizontal price line) – Bar or P&F chart
  9. Estimated upside profit potential is at least three times the loss if the initial stop-loss were hit – P&F and bar charts

Wyckoff Selling Tests for Distribution

  1. Upside objective accomplished – P&F chart
  2. Activity bearish (volume decreases on rallies and increases on reactions) – Bar and P&F charts
  3. Preliminary supply, buying climax – Bar and P&F charts
  4. Stock weaker than the market (that is, more responsive than the market on reactions and sluggish on rallies) – Bar chart
  5. Upward stride broken (that is, support line or uptrend line penetrated) – Bar or P&F chart
  6. Lower highs – Bar or P&F chart
  7. Lower lows – Bar or P&F chart
  8. Crown forming (lateral movement) – P&F chart
  9. Estimated downside profit potential is at least three times the risk for if the initial stop-order were hit – P&F and bar charts

“May your longs go up, your shorts go down and your flat positions stay sharply unchanged. Safe trading.” 

Nick

Risk Warning

Any content shared on NJCCapital.co is for educational purposes only and does not constitute a recommendation to buy or sell any financial instrument. Trading involves substantial risk and is not suitable for all investors. We have collated the most relevant content we can find from multiple sources including all of Wyckoff’s books (absolutely recommended reading), educational providers (of which there are many but I would point to stockcharts.com and WyckoffAnalytics.com as excellent teachers and a great resource for Wyckoff materials) and our own experience as traders and students of Wyckoff and being mentored by the late, great David Weiss. We will also publish the occasional video tutorial and any perspectives we think help in any small way to understanding the Wyckoff method and his theoretical and practical approaches to the markets.