All language subtitles for 💹 How Richard Wyckoff Verified Breakout Power & Followed Smart Money - Richard Wyckoff Trading Methods (720p, h264)

In the methodical science of market
analysis as developed by Richard

the transition of a stock from a
sideways trading range into a new

moment of immense opportunity.

This event, the breakout, is the point
where a long and often tedious period of

preparation culminates in decisive
action.

It is the first public signal that the
composite man, the amalgam of large

informed financial interests, has
completed his campaign of quiet

and is now ready to engineer a markup in
price.

For the average market participant,
however, this moment is fraught with

Many breakouts fail, trapping eager
buyers at the top of the range just

the price collapses.

These false moves, or upthrusts, are a
common tool of manipulation designed to

mislead the crowd.

The critical task for the serious
student of the market, therefore, is to

how to verify the power behind a
breakout.

It is the ability to distinguish between
a genuine display of overwhelming

demand and a deceptive manipulative
maneuver.

Wyckoff did not rely on hope or
guesswork in this crucial endeavor.

He formulated a series of precise tests
based on the irrefutable evidence of

price action and volume to confirm the
validity of a breakout and to identify

the exact point where the path of least
resistance had definitively turned

upward.

This is the story of how he did it.

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To fully understand the verification of
a breakout, one must first briefly

revisit the market phase that precedes
it.

As established in our previous
discussion, accumulation is the

process of absorbing the floating supply
of a stock.

It occurs within a trading range, a
sideways price channel bounded by

and resistance.

The lower boundary of this range is
often established by a selling climax

panicked public selling is met by the
massive buying power of informed

interests.

The upper boundary is typically set by
the subsequent automatic rally.

Within these confines, the composite man
works patiently, often for months, to

build his line of stock.

He buys on weakness, on reactions down
to the support line, and he allows the

stock to appear dull and lifeless to
discourage public interest and to tire

any weak holders who bought prematurely.

The Wyckoff analyst watches this period
of preparation for the key signs of

successful accumulation.

The gradual drying up of volume on
declines, signaling the exhaustion of

and the tendency for reactions to stop
at progressively higher lows, signaling

the increasing eagerness of the buyers.

The campaign often culminates in a
spring or shakeout, a final manipulative

drive below the support line to catch
stop -loss orders and shake out the last

of the weak hands.

When a stock has undergone this entire
logical sequence of events, it is

technically in a very strong position.

The ownership has been transferred from
weak, uninformed hands to strong,

patient, informed hands.

The available supply of stock at these
low prices has become scarce.

It is from this position of strength
after a long cause has been built that

stock is finally ready to produce the
effect of a sustained uptrend.

The breakout is the first stage of this
effect.

The primary event that signals the end
of accumulation and the beginning of the

markup phase is what Wyckoff colorfully
termed the jump across the creek in this

analogy the upper resistance line of the
trading range is visualized as a creek

which represents a significant barrier
of supply for the entirety of the

accumulation phase every attempt to
rally has been turned back at the edge

this creek a jump across the creek is
therefore a decisive powerful price

movement that carries the stock clear
out of and above this longstanding area

resistance.

The first and most critical criterion
for verifying this breakout is the

character of the price action itself.

A genuine breakout is not a timid or
hesitant event.

It should appear on the chart as a
definitive and often sharp advance,

characterized by a marked widening of
the price spread.

The stock should cover ground easily.

pushing into new high territory with a
sense of energy and purpose.

This is the visual evidence that demand
is now fully in control and is meeting

little to no opposition.

A stock that struggles to clear the
resistance, inching above it on narrow

bars and then stalling, is not
displaying the characteristics of a

breakout.

The composite man, having spent months
preparing for this move, will not allow

it to be timid.

His intention is to now attract a
following and leave the sellers behind,

the price action must reflect this
intent.

While the price action provides the
visual cue, the second and most

criterion for verifying the power of a
breakout is the volume signature.

According to Wyckoff's third fundamental
law, the law of effort versus result, a

significant result, such as a breakout
into a new uptrend.

must be accompanied by a significant
effort, which is volume.

A true jump across the creek must occur
on a distinct and substantial expansion

of trading volume.

This high volume is the irrefutable
proof that powerful demand has entered

market. It represents several forces
acting in concert.

It is the composite man himself now
aggressively bidding for stock to propel

out of the range.

It is the covering of short positions
from bearish traders who are now trapped

and forced to buy.

And it is the first wave of buying from
other professional traders who recognize

the technical signal and are joining the
move.

This confluence of demand creates the
high volume that is necessary to absorb

all the residual supply that naturally
exists at the old resistance level.

Shares from traders who are happy to get
out even.

A breakout that occurs on low or
diminishing volume is highly suspect.

It shows a lack of effort and suggests
that the demand is not powerful enough

sustain the move.

Such a breakout is often a precursor to
a failure, a false move designed to trap

the unwary.

Therefore, the Wyckoff analyst insists
on seeing this harmony between price and

volume.

The decisive price advance of the jump
across the creek, confirmed by a

expansion in volume, is the first part
of the two -fold verification that the

mock -up phase has truly begun.

The second part of this verification
process, and one that offers a superb

-risk entry point, is the maneuver
Wyckoff called the backup to the edge of

creek.

It is rare for a stock to launch into a
sustained, uninterrupted advance

immediately after its initial breakout.

More often than not, After the jump
across the creek, there will be a

or a period of sideways consolidation
that brings the price back toward the

level of the old resistance line.

This backing up action serves two
purposes.

First, it is a final test of the supply.

If the breakout was genuine and the
composite man is in control, there

very little stock available for sale on
this pullback.

Second, it serves to shake out any short
-term traders who bought in the initial

excitement of the breakout.

and are now taking quick profits, the
defining characteristic of a successful

back up to the edge of the creek is a
dramatic shrinkage of volume.

As the price recedes toward the breakout
level, the volume should diminish to a

fraction of what it was during the
breakout itself.

This low volume is the final conclusive
proof that the sellers are gone.

The former resistance of the trading
range now becomes support, and the lack

selling pressure on the test of this new
support confirms its validity.

This point, often referred to as the
last point of support, is one of the

and most effective places to initiate a
long position.

The trade can be entered with a very
close stop loss order placed just below

new support line, minimizing the risk.

The combination of a high -volume
breakout, the jump across the creek,

by a low -volume pullback to test that
breakout level, the back up to the edge

of the creek, constitutes Wyckoff's
complete two -stage verification of a

genuine buying opportunity.

The stock has proven its readiness to
advance, and the analyst can now take a

position with a high degree of
confidence that he is acting in harmony

intentions of smart money.

To fully master the art of verifying a
breakout, it is just as crucial to

understand its opposite, the upthrust,
or false breakout.

An upthrust is a manipulative maneuver
designed to do the exact opposite of a

jump across the creek.

Its purpose is to trap bullish traders
and create a fresh supply of stock for

distribution.

An upthrust occurs when the price moves
above the resistance of a trading range

but fails to sustain the advance and
quickly falls back into the range.

This often happens after a long advance
within a distribution trading range, but

it can also occur as a deceptive move
out of what appears to be an

range. Wyckoff provided clear criteria
to distinguish an upthrust from a

breakout.

The most telling sign is often found in
the volume.

An upthrust can occur in two ways.

First, the price may push above the
resistance line on conspicuously low

This demonstrates a lack of genuine
demand.

The move has no power behind it.

It is an effort without force.

and it is doomed to fail as soon as any
significant supply appears.

Second, and more deceptively, an
upthrust can occur on a sudden burst of

high climactic volume, but the price
makes very little upward progress and

stalls.

This is a classic example of the law of
effort versus result showing a

divergence.

The great effort, which is the high
volume, is failing to produce a

corresponding result, which would be a
sustained price advance.

This indicates that the apparent
breakout is being met with a massive

selling or distribution from the
composite man, who is using the public's

excitement about the breakout to unload
his shares at the highest possible

price. Following either type of
upthrust, the price will fail to hold

and will quickly fall back below the
resistance level and into the old

range.

This failure to hold the breakout is the
definitive proof that it was a false

move.

For the Wyckoff analyst, identifying an
upthrust is not only a signal to avoid

taking a long position but is often a
powerful signal to initiate a short

as it indicates that supply is in
control and a markdown may be imminent.

Thus, by understanding the distinct
characteristics of both the genuine jump

across the creek and the manipulative
upthrust, the trader can effectively

verify the power, or lack thereof,
behind any breakout.

Having examined the foundational
evidence that verifies the power behind

breakout, the task of the Wyckoff
analyst shifts.

The initial phase of detection, akin to
the work of a detective piecing together

clues of a hidden campaign, is now
complete.

With the stock having successfully
jumped the creek and confirmed its

the trader's role evolves into that of a
campaign manager.

The new objective is to skillfully
navigate the developing uptrend or mark

phase, remaining in harmony with the
intentions of the composite man for as

as the path of least resistance remains
definitively upward.

This requires a different, though
equally critical, set of analytical

One must learn to distinguish between a
healthy, normal reaction and the first

subtle signs of weakness or
distribution.

One must understand how to manage risk.

protect accumulating profits, and
recognize the key points within the

offer opportunities to increase a
position.

This is the art of following smart
money, a discipline of patience,

and adherence to the logical principles
that govern a stock's advance.

The first step in following the trend is
to understand the anatomy of a healthy

markup phase.

According to the Wyckoff method, a true
uptrend is defined by a persistent and

recognizable pattern, a series of higher
highs and higher lows.

This stair -step progression is the
visual evidence that demand is in

control Each upward thrust or swing
should push the price to a new high

demonstrating the buyers power Each
subsequent pullback or reaction should

at a higher price level than the one
that preceded it Demonstrating the

eagerness and the absence of significant
selling pressure This simple but

powerful structure is the backbone of
the trend

As long as this pattern remains intact,
the presumption is that the uptrend will

continue.

The Wyckoff analyst's job is to
continuously monitor the health of this

applying the law of effort versus result
to each of these swings.

The volume signature during the markup
phase is of paramount importance.

On the advances, as the price moves to
new highs, volume should ideally expand.

This shows that the effort represented
by the volume is in harmony with the

result, which is the price advance.

It indicates that demand is robust and
is easily overcoming the light profit

-taking that naturally occurs as the
stock moves higher.

Conversely, the most critical
characteristic of a healthy uptrend is

of the volume on reactions.

On each pullback or correction, the
volume of trading must noticeably

This is one of the most reliable signs
that a trend remains in a strong

technical position.

The diminished volume proves that the
selling is not aggressive or urgent.

It is not distribution from large
informed interests.

Instead, it represents passive light
profit -taking from short -term traders

weak hands who are easily shaken out.

The lack of significant selling pressure
allows the composite man and other

strongholders to easily absorb these
small offerings without disturbing the

price structure, often using these
reactions to add to their own positions.

If a reaction occurs on high or
expanding volume, it is a significant

sign.

It suggests that supply is coming into
the market in a volume that is

to the demand seen on the rallies.

This divergence between effort and
result

Heavy selling pressure that halts or
reverses the advance indicates that the

trend may be in danger.

Therefore, the Wyckoff analyst pays
meticulous attention to this interplay,

expanding volume on the advances and
contracting volume on the reactions.

This continuous confirmation of demand's
dominance provides the confidence

needed to hold a position and ride the
trend for a substantial move.

Within a major uptrend, it is rare for a
stock to advance in a single

uninterrupted line the markup phase is
typically punctuated by periods of

consolidation or sideways movement
wyckoff referred to these formations as

reaccumulation zones or more
colloquially as stepping stones these

essentially smaller scale trading ranges
that form within an established uptrend

After a stock has made a significant
advance, it will often pause and move

sideways for a period of weeks.

To the untrained eye, this pause may
look like a top, causing fear and

uncertainty.

However, to the Wyckoff analyst, these
stepping stones are highly bullish

formations and represent a crucial part
of the markup process.

Their function is to allow the stock to
rest and digest its previous gains.

During these periods, the composite man
is achieving several objectives.

First, he is absorbing the stock being
sold by early buyers who are content to

take their profits.

Second, he is shaking out nervous or
impatient traders who become frustrated

with the lack of immediate upward
progress.

By absorbing this profit -taking and
cleaning out the weak hands, he

consolidates his control over the stock
and prepares it for the next leg of its

advance.

These reaccumulation zones are to be
analyzed in exactly the same way as a

primary accumulation base, only on a
smaller scale.

The Wyckoff student looks for the same
signs of strength within this smaller

trading range.

He watches for volume to dry up on the
reactions to the support of the stepping

stone. He looks for a potential spring
or shakeout within the formation.

And he waits for a smaller -scale jump
across the creek as the price breaks out

of the top of the reaccumulation range
on expanding volume.

These formations are incredibly
constructive because they not only

the uptrend is still healthy, but they
also offer excellent low -risk

opportunities to add to an existing
position, a practice known as

Each successful stepping stone serves as
a new, higher level of support and acts

as a launch pad for the next phase of
the advance, reinforcing the overall

strength and integrity of the uptrend.

To visualize and manage the uptrend,
Wyckoff employed the practical tool of

trend line.

A basic uptrend line is drawn by
connecting two or more successive

lows.

This line is not an infallible signal,
but rather a tool to help the analyst

visualize the stride or angle of the
advance.

As long as the price remains above this
line, the trend is considered intact.

A break of the trend line is not an
automatic sell signal, but it is a

warning that the character of the market
is changing.

It signifies that the advance has at
least temporarily lost its momentum.

The meaning of this change must then be
determined by other evidence.

A broken trend line could mean that the
stock is simply entering a new

reaccumulation phase or stepping stone,
after which the advance may resume,

perhaps at a different, more sustainable
angle.

Or it could be the first sign that
supply is beginning to overcome demand.

potentially signaling the beginning of a
larger topping formation or

distribution.

Wyckoff cautioned against using trend
lines in a purely mechanical way.

Their value lies in providing hints and
directing the analyst's attention to

critical points where the market's
behavior must be weighed with extra

The practical management of a position
during the markup phase requires a

systematic method for protecting profits
while still giving the stockroom to

move.

The most effective tool for this is the
trailing stop -loss order.

Wyckoff's logic for managing a trade was
to let profits run but never to give

back a substantial portion of them.

The trailing stop is the mechanism that
achieves this balance.

The method is as follows.

After the stock has made a new high and
then completes a normal, healthy

reaction on diminished volume, the stop
-loss order should be moved up to a

point just below the low of that
reaction.

This process is repeated as the trend
progresses.

Each time the stock moves to a new high
and successfully completes a subsequent

pullback, the stop is trailed up behind
it, locking in a greater portion of the

paper profit.

This technique is brilliant in its
simplicity.

It prevents the trader from being shaken
out by the normal, healthy reactions

that are a necessary part of any
sustained advance.

At the same time, it ensures that the
trade will be automatically closed if

character of the trend changes.

For the uptrend to be broken, the stock
must by definition violate the previous

reaction low.

By placing the stop there, the trader is
forcing the market to prove that the

trend is over.

This method removes the emotional
element of deciding when to take a

replacing it with a logical, systematic
process that protects capital and

maximizes gains during a sustained move.

For those who wish to truly master the
lessons discussed here, it is essential

to study them from the source.

Please take note of a unique new edition
of Richard Wyckoff's masterpiece, How I

Trade and Invest in Stocks and Bonds, by
Max Davidson.

It has been meticulously adapted for the
modern trader.

complete with explanations that make
Wyckoff's timeless wisdom more

than ever.

For anyone who wants to truly absorb the
lessons we are discussing, this adapted

edition is an indispensable part of your
library.

The link to this book is located in the
description of this video.

In conclusion, verifying a breakout and
successfully following the smart money

through the markup phase is a dynamic
process.

It is not a one -time decision made at
the point of entry.

but an ongoing campaign of analysis and
prudent management it begins with the

strict verification of the breakout
ensuring that the jump across the creek

supported by the irrefutable evidence of
wide price spreads and expanding volume

it continues with the skill of
navigating the subsequent uptrend

interpreting reactions by their volume
signatures identifying reaccumulation

zones as opportunities

and using a logical trailing stop to
protect profits.

The Wyckoff analyst remains with the
trend as long as the evidence of healthy

demand persists, strong volume on
rallies and light volume on reactions,

long as the stair -step pattern of
higher highs and higher lows remains

His job is to stay in harmony with the
composite man until the first signs of

large -scale distribution begin to
appear, a topic for a future discussion.

This entire process transforms trading
from an emotional gamble into a

disciplined scientific business.