[DGC]

Hi There.

I’ve been reading about the stock market and Richard Wyckoff for some time now and it all makes absolute sense. However, as with anything, there’s always questions you have in your mind which you just can’t, either, find the answer to, or can’t see the the obvious. Like this one for example: -

In the normal market cycle, accumulation, mark-up, distribution, mark-down, etc; how exactly does mark-up/mark-down occur? If we take mark-up for example, when all the floating stock has been removed from the hands of “weak holders” in a phase of accumulation, what causes the stock to rise, if the people who want the stock to rise considerably have all the stock? Won’t it just go sideways at the trading range price for ever? Do you understand my confusion; where does the demand come from - whose buying?

I mean, if they (strong holders) keep raising their offer price from the breakout of the accumulation trading range, they have to keep selling back to someone (presumably weak holders again) to be able to keep the price slowly rising, and if that’s the case, surely by the time they reach a reasonable level for distribution all their stock has gone anyway.

If anyone could clear up this question, another piece of the puzzle would slot into place.

Many thanks in advance.

DGC.

[SIUYA]

Originally Posted by DGC »

Hi There.

In the normal market cycle, accumulation, mark-up, distribution, mark-down, etc; how exactly does mark-up/mark-down occur? If we take mark-up for example, when all the floating stock has been removed from the hands of “weak holders” in a phase of accumulation, what causes the stock to rise, if the people who want the stock to rise considerably have all the stock? Won’t it just go sideways at the trading range price for ever? Do you understand my confusion; where does the demand come from - whose buying?

I mean, if they (strong holders) keep raising their offer price from the breakout of the accumulation trading range, they have to keep selling back to someone (presumably weak holders again) to be able to keep the price slowly rising, and if that’s the case, surely by the time they reach a reasonable level for distribution all their stock has gone anyway.

If anyone could clear up this question, another piece of the puzzle would slot into place.

Many thanks in advance.

DGC.

I dont use Wyckoff but just from a simplistic point of view....... (stocks and futures are different here as stocks have limited amounts whereas futures dont but the makret mentality is the same.)
stocks can go up from a level as NEW/Late entrants enter. These are often referred to as dumb money (ignore all these names). Focus instead on a simplistic idea of being a late entrant......
You want to buy, someone will sell, but you have to hit the offer..... your desire to buy may over ride your sense of value, so you will bid it up....
Now take your ideas/mentality and multiply it by the many people in a market.
then add people who wish to short a market, people who will buy and sell, people who will trade intraday, people who will arbitrage, some of the original entrants will take profits, some of the original entrants will buy more and average in.
The extreme of this relies on the greater fool theory.... that is you will buy in the belief that someone else will buy at a higher price..... its at this stage supposedly all the smart money/strong hands have already departed and you are riding a ship of fools. This is ultimately who is buying at extremes.
Once you have a liquid stable market happening, there are more than just one set of players..... its dynamic, living and not reliant on a few players.
Its often great to think about extremes..... what happens if there are only two market participants.... what happens if there are unlimited numbers of participants, what happens if the market trades continuously, what happens if the market only trades once a day, once a week, once a year...... what then happens.

(NB - ignore all the silly names - its really just a liquid market)

[KeyToTheCastle]

Originally Posted by DGC »

Hi There.

I’ve been reading about the stock market and Richard Wyckoff for some time now and it all makes absolute sense. However, as with anything, there’s always questions you have in your mind which you just can’t, either, find the answer to, or can’t see the the obvious. Like this one for example: -

In the normal market cycle, accumulation, mark-up, distribution, mark-down, etc; how exactly does mark-up/mark-down occur? If we take mark-up for example, when all the floating stock has been removed from the hands of “weak holders” in a phase of accumulation, what causes the stock to rise, if the people who want the stock to rise considerably have all the stock? Won’t it just go sideways at the trading range price for ever? Do you understand my confusion; where does the demand come from - whose buying?

I mean, if they (strong holders) keep raising their offer price from the breakout of the accumulation trading range, they have to keep selling back to someone (presumably weak holders again) to be able to keep the price slowly rising, and if that’s the case, surely by the time they reach a reasonable level for distribution all their stock has gone anyway.

If anyone could clear up this question, another piece of the puzzle would slot into place.

Many thanks in advance.

DGC.

ahh...my dear old friend Mr Wyckoff.

Wycoff theory was one of the 1st things I tried to absorb as a young, newbie trader. Although my understanding of underlying market dynamics has evolved quite a bit since my early days I have found that Wyckoff definitely helped to form a basis for my understanding of market structure and the underlying forces that drive the market.

Demand in the mark up phase is coming from a mix of short covering and initiating longs.

Let me break down the sequence of events that typically occur during the transition from sellers to buyers at market swing lows:

As range extension lower brings in heavy selling from long capitulation , smart money sellers who are deep in the $$ with shorts from above start to buy to cover. This brings in more short covering which in turn brings in other smart $$ participants buying to go long. Then late chasing sellers (those who went short late in the down move) start to cover. All of this buying mixes to form ample fuel/demand for the ensuing rally.

Hope that helps to further your understanding!