How SMC and ICT Secretly Copied the Wyckoff Trading Method | Smart Money Course

Traders today are bombarded  with "smart money concepts", claiming to reveal the secrets of big players. But these ideas aren't as new as you might think! These concepts are just a modern  remix of the Wyckoff method.

The Wyckoff method, developed nearly a  century ago, is the original blueprint for understanding smart money trading! This is the video you need to watch, if you really want to learn about the  inception of smart money concepts! Understanding Market Dynamics Trading isn't a fair game.

It's not you against other small traders. It's  you against big players with deep pockets. These big traders have more money, better  tools, and access to info you don't have.

They know how retail traders think. And they  use this to trick small traders like you and me. Here’s the reality: the  odds aren't in your favor!

Wyckoff teaches you to use  logic to figure out the market. The big idea is this: when smart money buy  or sell, they leave marks on charts. These marks show up in price and volume data.

If you know how to read these signs, you can trade along with the pros. You're  not their prey anymore. You're on their side.

And you're not just guessing  anymore. You have a map. The Three Fundamental Laws The Wyckoff method is built on three key laws that explain how markets  work.

These laws help you see what's really moving prices, not just what's on the surface. Let's start with the Law of Supply and Demand. This law is the engine that drives the market.

It's pretty simple: when more people want to buy than sell, prices go up. When more want to sell than buy, prices go down. But it's not just about  numbers of buyers and sellers.

It's about how much money  they're willing to spend. It's about the intensity of their actions. One big buyer can have more impact than many small sellers.

The Law of Supply and Demand says that price, volume, and trend, all work together. Price shows which way the market is going. Volume shows how strong that move is.

When price and volume agree, it confirms the market direction. We’ll talk about this later. The Law of Cause and Effect tells us that big moves in the market don't just happen out  of nowhere.

They need preparation. It's like a rocket launch. Before a rocket  can take off, it needs a lot of fuel.

In the market, that fuel is buying or  selling pressure building up over time. The size of the cause determines  the size of the effect. A small cause leads to a small move.

A big cause can lead to a big move. This is why Wyckoff traders look for  signs of accumulation (which is buying) or distribution (meaning, selling). These are  the "causes" that can lead to big price moves.

This law helps explain why markets  sometimes seem to move for no reason. There's always a reason, but it might have been  building up for a while, before you noticed it. The Law of Cause and Effect also says that if  there's no preparation, there will be no move.

This helps you avoid false signals.  If you don't see a cause building up, you shouldn't expect a big effect. It’s all about preparation.

In the market, this often shows up as trading ranges. These  are periods where price moves sideways, bouncing between support and resistance levels. To the untrained eye, these might look boring.

But to a Wyckoff trader, they're  exciting. They're where the cause is building up for the next big move. Lastly, we have the Law of Effort versus Result.

This law helps us spot when  something's off in the market. It's about comparing the effort (usually measured  by volume) with the result (the price movement). Here's how it works.

The market is always  trying to move one way or the other. These attempts can be short or long. Either way,  they represent effort, which we see as volume.

If you see a lot of volume (meaning effort)  but prices barely move (meaning result), that's a red flag. It might mean the current trend is running out of steam. On the flip side, if prices move a lot on low volume, that move might not last.

This law helps you spot divergences. A divergence is when the effort and result  don't match up. It's like a warning sign that something might be about to change.

The Law of Effort versus Result is like a lie detector for the market, and is  especially useful for spotting trend changes. Often, before a trend changes, you'll  see a mismatch between effort and result. It's like the market is trying hard  to keep going in the same direction, but it's running out of steam.

Wyckoff Phases The Wyckoff method breaks down  market action into four main phases: Accumulation… Mark-up…Distribution…and Mark-down. Accumulation is the first phase. It happens at market bottoms.

This is when big players  start buying. They do this quietly, so prices don't go up too fast. During this phase, prices often move sideways.

It might look boring, but  a lot is happening under the surface. In accumulation, most people are scared to  buy. They think prices might keep falling.

But smart money sees value.  They buy when others are afraid. This phase can last a while.

It takes  time for big players to buy all they want, without pushing prices up too much. Look for these signs: • Prices stop falling and move sideways • Volume is low, but picks up on price dips • Price drops don't last long • Strong buying when prices fall a bit The uptrend or mark-up phase comes next.  This is when prices start to climb.

The big players who bought during  accumulation are now letting prices rise. They might even buy more, pushing prices higher. In the uptrend, more people start to notice the market.

They see prices going up and want to join in. This extra buying helps push prices even higher. Look for these signs in an uptrend: • Prices make higher highs and higher lows • Volume often increases as prices rise • Pullbacks are short and shallow • Each new high is met with strong buying The third phase is distribution. 

This happens at market tops. Big players who bought low are now selling. They sell slowly, just like they bought slowly.

They don't want to crash the  market by selling too fast. In distribution, most people are excited.  They think prices will keep going up forever.

But smart money knows better. They're  quietly selling to these eager buyers. Like accumulation, distribution  can take some time.

Look for these signs in distribution: • Prices stop rising and move sideways • Volume might increase,  but price rises don't last • More volatility, with sharp ups and downs • Each new high is quickly sold into The last phase is the downtrend or  mark-down. This is when prices start to fall. The big players have finished selling.

Now  there aren't enough buyers to keep prices up. In the downtrend, fear takes over. People  who bought high start to panic and sell.

This pushes prices down even faster. Like the  uptrend, the downtrend often moves in waves. Look for these signs in a downtrend: • Prices make lower lows and lower highs • Volume often increases as prices fall • Bounces are short and weak • Each new low is met with more selling These phases don't always happen in a perfect cycle.

Markets are messy. Sometimes a phase  might be skipped, or cut short. Other times, a phase might last longer than expected.

The key is to be flexible, and watch for the signs of each phase. In accumulation, you start to get ready to buy. You look for signs  that big players are accumulating.

These signs might include failed attempts to push  prices lower, or strong buying when prices dip. During the uptrend, the goal is to buy pullbacks.  These are temporary dips in an overall rising market.

You wait for the uptrend to be confirmed  before buying. You don't try to guess the bottom. In distribution, you start to get cautious.

You  might take profits on long positions. You watch for signs that the uptrend is weakening. These  signs could include failed attempts to make new highs, or increased selling at high prices.

During the downtrend, the goal is to sell short. Most of the money in a trend is made in phase  2 (the uptrend) and phase 4 (the downtrend). The transition phases (accumulation and  distribution) are often trickier to trade.

They're more about preparing for the next trend. One key skill in using the Wyckoff method is identifying changes in market  character. This is when the market shifts from one phase to another.

For example, the shift from accumulation to uptrend, or from distribution to downtrend. These changes often happen gradually. The market doesn't suddenly switch from one phase  to another.

Instead, it transitions slowly. Another important aspect of the Wyckoff method, is  understanding the concept of supply and demand. In accumulation, demand is slowly overcoming supply.

In distribution, supply is slowly overcoming demand. The uptrend and downtrend  are when these forces play out. Volume plays a crucial role in identifying  these phases.

In accumulation, volume often increases on price dips. In distribution, volume often increases on price rises. Another key point: in both accumulation and distribution, big players are  trying to hide what they're doing.

They don't want everyone to know they're  buying or selling big amounts. That’s because they would move prices before they're ready. This is where the idea of "smart money" comes in.

These are the big, well-informed players. And they're always trying to stay ahead of the "uninformed" traders. Remember this: accumulation and distribution are about more than just buying and  selling.

They're about the transfer of risk. In accumulation, smart money is taking on  risk, betting that prices will go up. In distribution, they're passing that risk  to others, to less informed traders.

And one more thing to remember: emotions play  a big role in these cycles. In accumulation, fear is the main emotion. People are scared  to buy because prices have been falling.

In distribution, it's often  greed and fear of missing out. People buy because they're afraid  of missing the next big move up. Now, before we continue, let us know in the  comments what topics you’d like us to cover!

Tell us what you want to watch next! Wyckoff Events Now let's break down Wyckoff events.  They're like clues that help us figure out what's really going on in the market.

First, we have the Preliminary Support. This is when big players start to buy,  trying to stop prices from falling more. It's like putting a floor under the market. 

You might see prices stop dropping as fast, or even bounce a little. Next comes the Selling Climax. This is a big moment.

It's when  scared sellers dump their positions. Prices often fall hard and fast. But the  big players are buying during this panic.

They're getting ready for prices to go up later. After the Selling Climax, we see an Automatic Rally. Prices bounce up a bit.

This happens because the selling pressure eases off. It's like the market taking a breath after all that selling. Then we have the Secondary Test.

Prices fall again, but not as low as before. This is important. It shows that the big drop might be over.

Big players are still buying, keeping prices from falling too far. Now we come to the Spring. This is a tricky move.

Prices dip below the low point of  the Secondary Test. It looks like the market might fall more. But it's often a fake-out.

Prices quickly jump back up. This is a key sign that big players are done buying  and are ready for prices to go up. After the Spring, we see a Sign of Strength.

This  is a strong move up, often with lots of trading. It's like the market saying,  "We're ready to go up now. " And then we have the Last Point of Support.

This  is one more dip before the real uptrend starts. It's like the market taking one  last breath before climbing. These events don't always happen in  this exact order.

Markets are tricky and always changing. But knowing these  events helps you see the big picture. If you see signs of accumulation (like  the Preliminary Support or Spring), it might be a good time to think about buying.

If you see signs of distribution (like a Buying Climax or Sign of Weakness), it might be time  to be careful or even think about selling. The end of an accumulation phase, like after a  successful Spring, can be a great time to buy. The end of a distribution phase  can be a good time to sell.

But remember, you don't need to  catch the exact bottom or top. What matters is catching the main move. And don't get too hung up on naming each event.

What's more important is understanding  what these events mean. They're showing you the transfer of risk in the market. Like I said before, in accumulation, smart money is taking on risk, betting  prices will go up.

In distribution, they're passing that risk to others. Volume Analysis in Wyckoff Method Volume is a key part of the Wyckoff method.  It helps confirm what price is telling us.

The main idea is simple: volume  should match price moves. If prices go up, volume should too.  If prices fall, volume should rise.

When volume and price don't  match, it can mean trouble . Wyckoff saw the market as a  fight between buyers and sellers. Volume shows who's winning.

High volume  on up moves means buyers are strong. High volume on down moves  means sellers are in control. We talked before about Wyckoff's  law of effort versus result.

This law says the effect of a price move should  match the effort behind it. The effort is shown by volume. The result is the price change.

Here's how it works: • Big volume (the effort) should  lead to big price moves (the result) • Small volume should lead to small price moves. • If there's a mismatch, it can signal a change coming • High volume with little price change often means accumulation or distribution • Low volume with big price moves usually isn't sustainable • Rising prices with falling volume can mean the uptrend is weakening Volume helps confirm price action. It's like a lie detector for price moves.

Yes,  price alone can sometimes lie, but price and volume together usually tell the truth. In accumulation, watch for high volume on down days, that don't push prices much lower. This can mean big players are buying, soaking up the supply.

It's a sign  the downtrend might be ending. In distribution, look for high volume on  up days that don't push prices much higher. This often means big players are selling into  strength.

It's a sign the uptrend might be ending. During trends, volume should generally  increase in the direction of the trend. In an uptrend, volume should be  higher on up days.

In a downtrend, volume should be higher on down days. But it's not just about whether volume is high or low. The spread, the body of the price bar matters too.

Wyckoff and later traders like Tom Williams  saw the relationship between volume and spread. Here's what to look for: Wide spread, high volume: this means usually bullish Wide spread, high volume: this means usually bearish Narrow spread, low volume: often means consolidation One common pattern is a climax. This is a day with very high volume and a wide  price range.

It often marks the end of a move. In a downtrend, it might be a selling climax,  marking the end of the drop. In an uptrend, it could be a buying climax,  signaling the end of the rise.

After a climax, watch for a test. This is  when prices return to near the climax level, but on lower volume. If the test  holds, it can confirm the end of the old trend and the start of a new one.

Volume can also help spot manipulation. If you see a big price move on low volume, be  suspicious. It might be a false move designed to trick traders.

Real, sustainable  moves usually come with solid volume. In the Wyckoff method, volume isn't just  about quantity. It's about quality too.

A day with steady buying is different from a  day where all the volume comes in one big spike. Learn to read the quality of  volume, not just the quantity. One key skill is spotting  divergences between price and volume.

If prices are making new highs but volume is  dropping, it can mean the uptrend is weakening. If prices are making new lows but volume is drying  up, the downtrend might be running out of steam. Volume patterns can also hint at what's  coming.

For example, expanding volume as prices move sideways often precedes a breakout. The direction of the breakout isn't certain, but the increase in volume suggests  something big is cooking. In accumulation, you might see a series  of high-volume down days that fail to push prices lower.

This is often followed  by an upward surge on even higher volume. This pattern can signal the end of  accumulation and the start of markup. In distribution, you might  see a series of high-volume up days that fail to push prices higher.

This is often followed by a downward plunge on even higher volume. This pattern can signal the  end of distribution and the start of markdown. Volume can also help with timing.

In  a strong trend, wait for a pullback on lower volume before entering. This often  provides a good entry point with lower risk. And one final point about this: volume often  leads price.

You might see volume patterns change before price patterns do. This can give  you an early warning of potential trend changes. Composite Man Concept Wyckoff talked about the "Composite Operator" in his books.

This isn't  one person. It's a way to think about all the big players as if they were one. These big players include banks, hedge funds, and other pros.

And they often act in similar ways. They're all trying to make money. And they  have more info and power than regular traders.

The Composite Man isn't real. It's a tool  to help us understand the market. It's like pretending the market has a mind of its own. 

And this mind is smart and sometimes tricky. Here's what the Composite Man does: • He buys when prices are low. • He sells when prices are high.

• He acts in its own interest. • And he knows how to move prices. The Composite Man doesn't control the whole market.

But it has a big impact. It  can push prices up or down for a while. The Composite Man concept helps explain why  markets often move in ways that seem odd.

Why does price drop right before a  good news release? The Composite Man might be selling into the excitement. Why does a market sometimes go up on bad news?

The Composite Man might have  already sold. The bad news was expected. Now it's buying again at lower prices.

Trading with the trend is key. If the Composite Man is pushing price up, don't try to  short. You'll probably lose.

Go with the flow. Again, always check volume. It's the  footprint of the Composite Man.

Big volume moves are often important. The Composite Man links to other Wyckoff ideas. Springs and upthrusts, for  example, are often the work of the Composite Man.

We’ll talk about these in a minute. This concept also explains why stop hunting happens. The Composite Man knows where stops  are likely to be.

It can push price to hit those stops. Then it trades against the stop orders. You'll soon realize that see that many price moves aren't random.

They're often planned. Spring and Upthrust (Price Manipulation) The Spring and the Upthrust are  key patterns in the Wyckoff method. A Spring is a quick drop below  support that bounces back fast.

An Upthrust is a quick push  above resistance that fails fast. Both are fake-outs that run stops outside  support and resistance. Smart money concepts named them liquidity sweeps or liquidity runs.

Why do they happen? Because big players often push price past key levels to trigger stop losses.  This lets them buy or sell at better prices.

It's like shaking a tree to make the fruit fall. Let's look at Springs first. In a trading range, price might dip below support.

If it jumps back  up fast, that's a Spring. It means there's strong buying down there. It often leads to a move up.

Here's how to spot a Spring: • Price is in a range • It breaks below support • It doesn't stay there long • Then it jumps back above support fast Upthrusts are the opposite.  Price pops above resistance, but falls back quickly. It shows there's strong  selling up there.

It often leads to a move down. Here's how to spot an Upthrust: • Price is in a range • It breaks above resistance • It doesn't stay there long • Then it drops back below resistance fast Both patterns show a fight between buyers and sellers. In a Spring, sellers try  to push price down, but buyers win.

In an Upthrust, buyers try to  push price up, but sellers win. For a Spring, the plan is to buy  when price jumps back above support For an Upthrust, you sell when  price drops back below resistance But it's not always that easy. You  need to look at the bigger picture too.

For Springs, check if the overall trend is  up. A Spring in an uptrend is stronger than one in a downtrend. Look for signs  of accumulation before the Spring.

This makes the pattern more likely to work . For Upthrusts, check if the overall trend is down. An Upthrust in a downtrend  is stronger than one in an uptrend.

Look for signs of distribution  before the Upthrust. This makes the pattern more likely to work . Volume is key in these patterns.

In a Spring, you want to see high volume on the drop  and even higher volume on the bounce. This shows strong buying. In an Upthrust, you want high  volume on the push up and even higher on the drop.

This shows strong selling . Some traders do well without focusing on volume. The price action itself can be enough.

The context matters a lot. A Spring or Upthrust at the end of a long trend is  more powerful than one in the middle of a range. It might signal a big trend change.

One trick is to look for smaller ranges near the edge of bigger ranges. These often lead to good  breakouts. You might see Springs or Upthrusts in these smaller ranges before a big move.

Sometimes, you won't see a Spring or Upthrust at all. This is called a structural failure.  It happens when price fails to reach one side of a range and then breaks out the other  way.

This can be a strong signal too. One way to practice is to look for these  patterns after the fact. Go through old charts.

Mark the Springs and Upthrusts. See what happened after. This trains your eye to spot them in real-time.

Advanced Wyckoff Concepts Now let's dive into some  advanced Wyckoff concepts. One advanced concept is the "creek". This is a small, tight trading range that forms after a big move.

It's like a pause in the action. But it's not random. It often shows up at key points in trends.

Creeks can be hard to spot if  you're not looking for them. They might look like normal price action.  But they can signal big moves ahead.

Here's how to use creeks: • Look for them after strong trends • Check if volume dries up in the creek • Watch for a strong move out of the creek If you see these things, it might be  a good trade setup. The move out of the creek often starts a new trend. Another advanced concept is the idea of "tests".

These are like mini-versions of  springs and upthrusts. They happen all the time, not just at major turning points. A test is when price moves back to a previous support or resistance level.

It's  checking if that level still holds. If it does, it can be a good entry point for a trade. Tests are powerful because they show real supply and demand in action.

They're not just lines on a chart. They show where real buying and selling is happening. Here's a pro tip: look for tests that fail.

If price tests a level and breaks through, that  can signal a big move. It means the previous support or resistance isn't working anymore. Another advanced idea is "absorption".

This is when big players buy or sell without  moving price much. It's hard to spot, but it's a powerful signal. Absorption often shows up as high volume but little price movement. 

It might look boring on a chart. But it can signal that a big move is coming. Wyckoff traders always think about context.

They don't just look at patterns. They think about  where those patterns fit in the bigger picture. For example, a spring in an uptrend is  different from a spring in a downtrend.

A test of support after a long uptrend is  different from a test early in a trend. Another advanced idea is "swing analysis".  This is about measuring the strength of moves up and down.

It can show you if  a trend is gaining or losing strength. In an uptrend, you want to see higher  highs and higher lows. But how much higher?

Swing analysis helps you measure this.  If the swings are getting weaker, it might signal a trend change coming. Another advanced idea is "the fractal analysis".

This is about understanding that  Wyckoff patterns show up on all timeframes. A spring on a 5-minute chart works the  same way as one on a monthly chart. Understanding fractals can help  you trade multiple timeframes.

You might use a bigger timeframe for  direction, and a smaller one for entries. Now, if you liked what you saw, we have plenty  more interesting trading guides for you!