A Wyckoff Approach To Future
by Craig F. Schroeder
The Wyckoff approach, which has been a standard for decades, is as valid for futures as it is for stocks,
but even students of the technique appear to be unaware of its extended uses. Most technicians know that
Wyckoff analysis stresses volume and price, and as there is always uncertainty about the level of volume
on current and previous days for futures, it seems logical to conclude that Wyckoff and futures are not
compatible. This may seem logical, but it's wrong. According to Schroeder, Wyckoff is not simply about
price and volume; it is concerned with three laws — supply and demand, cause and effect, and effort and
result — because these three laws apply to all interactions. Schroeder explains.
Many students of the Wyckoff method do not associate Wyckoff analysis with futures trading —
unfortunate, but not difficult to understand how such a mistake can be made. Anyone familiar with the
teachings of Richard Wyckoff knows that stocks and stock market action exclusively are used as
examples of principles. The lack of examples from the futures market naturally leads to the erroneous
conclusion that the principle cannot be applied to futures. Most technicians also know that Wyckoff
analysis stresses the study of volume and its relation to price. As there is always uncertainty about the
level of volume on both current and previous days, it is logical to conclude that Wyckoff and futures do
not mix. Although these conclusions may seem logical, they are not correct.
Wyckoff analysis is not just about stocks and the stock market. It is not even just about price and volume
relationships, even though they are the primary focus. Wyckoff is about three basic laws: supply and
demand; cause and effect; effort vs. result. These three laws apply to everything that people buy from,
sell to or exchange with others.
IF/THEN FOR ALL
In the law of supply and demand, when the pool of buyers demands more product than is immediately
available, the price of that commodity will rise until demand diminishes to the level of available supply.
At the same time, the pool of sellers, seeing that prices are rising, will take steps to increase the available
supply of a commodity. When available supply exceeds the demand, then prices will start to fall.
The law of cause and effect is closely related to the law of supply and demand and states that every price
movement is the direct result of a previous price movement or combination of movements. The price
markup phase results from the accumulation phase that precedes it and is proportional to that
accumulation phase. Similarly, the price markdown phase is the result of the distribution phase that
precedes it and is in proportion to the distribution phase.