Trading the Wyckoff Terminal Upthrust and Spring Method

Trading in trending markets is very easy and on contrary, trading in side ways market is most challenging. Richard Wyckoff's theories may help trading sideways markets efficiently. His methods define the sideways markets, how and why there are formed and how to trade in side ways markets. Wyckoff Terminal Up-Thrust and Swing is one such methods for trading the range bound markets.

Markets tend to move in both the directions based on the relative compatibility between the bears and bulls. After moving in certain trend, it starts moving in sideways direction to catch a breath, for example, consolidations etc. When markets are in the consolidation mode, trading ranges are formed. Wyckoff defined a techniques called Terminal Up-Thrust and Swing, which has a clear entry, stoploss and exit levels.

Initially a trading range is formed as the supply and demand are in certain equilibrium. Where high of the range is treated as supply line and the low of the range is defined as demand line. Now the trading opportunities are formed in certain criteria specifically like price tries to move above the supply line or below the demand line and unable to sustain. They can provide a good trading opportunity as there is a strong probability of returning into the opposite side of the Accumulation/Distribution ranges.

In Up-Thrust, prices break above the resistance line, and failed to move further up. One can go short in the next confirmation bar, by keeping the high as the stop loss. Price target would be the retest of the lower or support line of the trading range. This kind of false breakout above resistance range is called up-trust, and the bearish candlestick indicator is an invoking opportunity to enter the trade. Opposite of this up-trust is spring where prices give false breakdown from the support trend line and bullish candlestick indicator like hammer or few times a bullish engulfing may also confirm the trading opportunity.

Here in the above example trading range is formed between A and B. There was an up-thrust at “C” where the candle broke the highs of the trading range and failed to hold. The failure brings the bears into action, and the other bearish signal from the candlestick shooting star or doji gives a powerful sell signal, which leads us to the target at the support area.

Here in the above example, at the terminal up-thrust a shooting star and a bearish 123 pattern is formed, helping the down move.