Foreword – 1M
This is a method of judging the stock market by its own action. It is intended for the individual investor/speculator. This course has been planned and prepared for those who desire to safeguard their investment capital against; and to make money from, the fluctuations in the prices of stocks dealt in on the New York Stock Exchange or any other organized exchange. It has been applied with some modifications to the markets for bonds, preferred stocks and the leading commodity markets.
Anyone who buys or sells a stock, a bond, or a commodity for profit is speculating if he employs intelligent foresight. If he does not, he is gambling. Your purpose should be to become an intelligent, scientific and successful investor and trader.
This method is for those who have either little or no experience operating in the stock market, or for those who have had much experience but who have never been shown the real rules of the game. Out of the very limited number who really understand the inner workings of the stock market, practically no one has been willing to show the public the real inside. We believe it is time for someone to step forward and do this. The appalling losses in securities, suffered annually by millions of people, are the direct result of stock market operations by people, most of whom do not realize what they are risking, and who have an amazingly small knowledge of the market.
There can be no question that the public needs help in its security market operations. Richard D. Wyckoff believed that the best way to help people was to show them how to help themselves; and Wyckoff SMI is offering the principles which Richard D. Wyckoff learned through forty years of active experience in Wall Street.
By the methods herein explained, Richard D. Wyckoff made a great deal of money for himself and his clients and subscribers. By making this available to those who desire to learn the business of trading and investing in stocks – for it is a business just like law, medicine, or any other profession – SMI believes it is providing the public with a most important educational experience.
After you have learned this method, you can devote half an hour, an hour, all day or as much time as you like, to determining the position and the probable trend of the market, selecting the best stocks in which to make commitments and the best time to buy and sell. You can learn from this how to develop independent judgment, so that you will know just what to do and when to do it. When you are in doubt you will do nothing.
Wyckoff SMI does not claim that you can be invariably right. No one could. What we aim to do is to help you acquire a greater knowledge of this business and help you develop skills in employing that knowledge, so that you may develop the judgment which may result in your being right in the majority of instances. This will require close study and self-training on your part.
We will teach you to plan your stock market campaign just as a general plans his battles.
There are five steps to the Wyckoff Method
Step 1 – Determine the present position and probable future trend of the market. Then decide how you are going to play the game: long, short or neutral.
Step 2 – Select from those stocks in harmony with the market the ones stronger than the market in a bull (up) market; in a bear (down) market select those that are weaker than the market. For example, if you select from a group of 100 stocks at any given time you are likely to find some 5, 10 or 15 stronger than the market.
Step 3- Select those stocks which have built up a cause, a potential count for a move in keeping with your goals.
Step 4 – Determine each stock’s readiness to move. Analyze the vertical and figure charts of the candidates with the aid of the buying and selling tests.
Step 5 – Time your commitment with a turn in the market. For this decision use SMI’s Trend Barometer (Optimism-Pessmism Index, Force Index, and Technometer) and SMI’s “Pulse of the Market” charting software to buy at or near the end of a reaction, or sell short at or near the end of a rally.
Skill in applying these five steps is developed through a disciplined study of the text and the use of the Wyckoff SMI services and “tools” now included as a part of this complete program.
This program in investing/speculating is designed to teach students to preserve, protect and to appreciate capital in stock market transactions, in their own portfolios, as fund managers, brokers, bankers, trust officers, investment analysts, or in related responsibilities in their jobs.
__________________________________________________
The following document is our Pre-Trade Analysis Record which is a check-off sheet to assist in decision making as to whether a position is or is not to be taken for a given stock. This is a very simple form which should be used prior to making any decision to trade. To ignore the negative responses to the pre-trade tests and proceed with the trade incurs the same unnecessary risk a pilot would assume in ignoring a “no-go” condition.
“Avoidance of loss” should be the guiding principle. The Pre-Trade Analysis Record is a guide to making trades with a minimum of risk; trading only in the best stocks; at the best time; when all conditions are favorable; and, knowing under what conditions to terminate a trade after it is made. This is the Wyckoff Way.
IMPORTANT POINTS
1. Richard D. Wyckoff, through long experience, developed a method of judging the stock market by its own action .
2. A speculator uses intelligent foresight in buying or selling stocks. To sell or buy stocks otherwise is gambling.
3. You must learn to determine the position and probable future trend of the market. To do this, you must learn the Wyckoff principles then devote time to applying them in your market operations.
4. Throughout this course we will help you to develop independent judgment and self-discipline so as to become an intelligent, scientific and successful trader and investor.
5. An important point to learn early is that when in doubt – do nothing. Wait and see.
6. By conscientious application of the Wyckoff principles, you should strive to be right most of the time – but realizing that many times you are going to be wrong.
7. Plan your own stock market activities like you would any campaign.
8. The Wyckoff Method of trading in stocks is a logical five-step approach to stock market investing/speculating.
9. The Pre-Trade Analysis Record is a “check-list” which should be used prior to making any decision to trade.