Wyckoff Spring Setup
A Quick Glance at Wyckoff's Incredible Trading Strategy
Range Break Fake
Years ago, I came up with a trading strategy that I called the “range break fake”.
It consisted of this pattern:
- Price forms a range
- Price breaks out of the range
- Fails to follow through
- Reverses back into the range
- Explodes strongly out of the range in the other direction
Here’s an example of an intraday range break fake to the downside on the DOW:
Textbook stuff – Trend, range, fake out against the trend, immediately smashed back into the range, and follow through.
Then I started studying Richard Wyckoffs work a bit more…
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The Spring Setup
The spring setup is kind of a range break fake to the upside.
It turns out I wasn’t a genius who discovered a new pattern in the markets, traders have been playing this for years. (Who would have thought…!) Anyway, here are the basic rules:
- A support level gets tested
- The market breaches that support
- Bounces back above the support
*Sometimes you will get a second test if the first had high volume
Here are some chart examples:
Wyckoff suggested you should
- Align the spring with the trend.
- Wait for the break
- Look to trade long back above the support level.
He also warned that springs will often be tested twice. (Especially if the first break had higher than normal volume).
In that case, you either needed to be prepared for the retest under high volume conditions with a wider stop or consider a second bite of the cherry.
A nice clear setup that’s easy to scan for and trade.
If you are a Traders Mastermind member, you can access the Springs Masterclass and many more in your dashboard.
There are also a few books covering Wyckoff‘s work:
Trades About to Happen – David H. Weis (I have this one and wasn’t blown away, a decent book to reference from time to time).
Wycoff 2.0 – Ruben Villahermosa (I’ve not read this one yet, I’m sure it’s on a bookshelf somewhere… I’ve got way to many unread books!)
Linda Raschke made a video called “What would the great technical masters say today?” which in one section talks more about Wyckoff springs.
Starts at 24:56. Linda is always worth a watch.