A Wyckoff Approach to Crypto Futures | by LBank Exchange | Mar, 2023

From the LBank blog.

A Wyckoff Approach to Crypto Futures

It goes without saying that combining trading principles and simplifying charts plays a vital role in analyzing market trends. With this approach, traders can predict the future trends of the crypto markets. They also employ proven methods, such as the Wyckoff approach to analyze market price movements.

This trading technique has been used since its conception by Richard Demille Wyckoff, who was a writer and stock trader during his time. He developed this technique to have a systematic way of analyzing trading opportunities that would bring profit. The basis of the Wyckoff Method consists of two goals, three laws, and five steps, all of which can be stated in relatively few words. This article will explore what this approach entails and how to apply it to crypto futures.

One of the primary objectives of Wyckoff’s strategy is to ensure consistent profits that exceed the available rewards of fixed trade where the return is guaranteed. Those returns exceed the guaranteed returns of a margin wide enough to make an effort worth it.

Essentially, Wyckoff’s approach ensures the preservation of capital. When you enter a trade position, your capital is typically exposed to risks, however, the risk can still be managed. Wyckoff teaches that no position should be taken unless you have a predetermined exit strategy. Since LBank Crypto Futures offer several tools to allow you to trade like a pro, the Stop Loss and Take Profit can always be applied when taking a position.

The three laws underlying Wyckoff’s Method are the

  1. Law of supply and demand

The price of each trade surges or drops in response to the excess of demand over supply or supply over demand expressed in the form of buying or selling crypto assets for fiat.

2. Law of cause and effect

This law establishes the excesses that develop in supply and points to the critical events in market actions. Wyckoff’s analysis helps evaluate these effects and determine when they occur in time to take advantage of the next excess supply or demand.

3. Law of effort vs. results

This shows that the price changes of a coin are the result of an effort expressed by the volume level and that the harmony between the effort and the result favors a more significant move in price.

Below are Wyckoff’s ideals:

  • Buy in accumulation
  • Sell in Distribution

It’s pretty straightforward to put that into perspective and analyze which cycle most coins are in just by looking at any old coin chart.

4. Determine the trend and position of the market in which you are trading

Once a trend has been established, the future trend is likely to be the same as the current trend until the price reaches a certain point or exhibits price and volume action, indicating that a change in trend should be anticipated. Knowing this can positively affect your trade decisions.

5. Determine the relative strength or weakness of the subject under study

The market trend indicated by the Wyckoff wave suggests the line of least resistance. It reflects the direction in which most individual lines are moving.

Traders who take positions consistent with the line of least resistance are more likely to get positive results than traders who try to fight the trend. It is always better if the market works for you than against you.

6. Establishing a position

While it is true that there are always individual issues that make substantial movements in the opposite direction of the general market, most move with the market to some extent.

By identifying a point in general market action from which it is likely to change in the direction of an established trend or initiate the move of a new trend and take a stand — there you, as a Wyckoff trader, have a better chance of profiting from this position.

7. Accumulation of Wyckoff

This is basically the process of holding a particular asset over a period of time. The accumulation phase is a period of range and side limit that occurs after a prolonged downtrend.

This is the area where the more prominent players try to build positions and get rid of the smaller fish without causing a bigger price drop or the start of a new trend. The sole purpose of accumulation is to maintain and improve trade timing. It helps in establishing a position in the market that makes it more possible to profit from.

Crypto futures trading should not be viewed as having simple automatic buying or selling points. While most offer the opportunity to make a profit, some are likely to be more profitable than others.

One aspect to consider in determining which major trading positions are better than the others. Those that indicate the highest potential are likely to provide the highest returns.

All these can be achieved by using the Wyckoff method. Having even a basic understanding of this model and dynamics is invaluable knowledge that can be used to improve any trading system.

Disclaimer: The opinions expressed in this blog are solely those of the writer and not of this platform.

This article came directly from the LBank blog, found on https://lbank-exchange.medium.com/a-wyckoff-approach-to-crypto-futures-5c2f74b623a2?source=rss-87c24ae35186——2

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