$BTC Complete Guide: Wyckoff Volume Analysis – Accumulation and Distribution
📍Volume analysis based on the Wyckoff method is a classic approach that helps traders understand market behavior through the forces of supply (selling) and demand (buying). This technique identifies accumulation and distribution zones, which are essential for anticipating large price movements.
🎯What is the Wyckoff Method?
Developed by Richard Wyckoff, the method is based on five main laws, but the most relevant for volume analysis are:
Law of Supply and Demand:
The price rises when demand exceeds supply and falls when supply exceeds demand.
Law of Cause and Effect:
Accumulation (cause) leads to an upward movement (effect), while distribution (cause) results in declines (effect).
These laws are used to identify patterns that indicate whether the market is being accumulated or distributed.
📍The Market Cycle at Wyckoff
The market follows four cyclical phases:
Accumulation:
The price moves sideways after a downtrend. Here, large players (institutions) accumulate assets at low prices.
2. Uptrend:
After accumulation, an upward movement occurs due to buying pressure.
3. Distribution:
The price stabilizes at a top. At this stage, large players distribute assets to small investors.
4. Downtrend:
After distribution, the price drops due to oversupply in the market.
Accumulation Phase
Features:
The market is in a lateral movement (consolidation zone).
Volume gradually increases at lows (support), indicating institutional buying.
Prices remain contained between support and resistance levels.
Wyckoff Patterns in Accumulation:
Pre-Support (PS):
The price stops falling, showing that selling forces are waning.
Selling Climax (SC):
A sharp drop accompanied by a spike in volume.
Tests (ST):
Price retests the support area with lower volume.
Resistance Break (SOS):
A break above resistance confirms the start of an uptrend.
Distribution Phase
Features:
The market is showing a lateralization at the top.
Volume increases at highs (resistance), indicating that large players are selling.
Small investors buy, believing that the uptrend will continue.
Wyckoff Patterns in Distribution:
Pre-Resistance (PSY):
Buying strength starts to wane at the top.
Buying Climax (BC):
A sudden increase in price accompanied by high volume, indicating large sales.
Tests (ST):
The price tries to reach the top again, but with less volume.
Support Break (LPSY):
A break below support confirms the start of a downtrend.
❓How to use Volume in Wyckoff Analysis?
Identify Accumulation and Distribution Zones:
Observe volume behavior during consolidation periods.
Increasing volume at lows → Accumulation.
Increasing volume at highs → Distribution.
Look for Divergences:
During accumulation, the price may remain stable while volume gradually increases.
In distribution, the price may move sideways while the volume at the highs increases.
🎯Combine with Other Indicators:
Use moving averages or RSI to confirm reversals after accumulation and distribution phases.
Practical Example:
An asset is consolidating after a downtrend.
Volume consistently increases at lows while price remains within a narrow range.
After a breakout of resistance with high volume, the price starts an uptrend, confirming the accumulation.
Final Tips for Wyckoff
Look at higher timeframe charts (H4, daily) to identify clearer patterns.
Combine with support and resistance analysis to confirm accumulation/distribution zones.
Monitor volume at different points in the market cycle to validate your entries.
With practice, the Wyckoff method can help you identify big moves before they happen!
