07/05/2020
Richard Demille Wyckoff (1873β1934) was an early 20th-century pioneer in the technical approach to studying the stock market. He is considered one of the five βtitansβ of technical analysis, along with Dow, Gann, Elliott, and Merrill.
Wyckoff was an avid student of the markets and an active tape reader and trader. He observed the market activities and campaigns of the legendary stock operators of his time, including JP Morgan and Jesse Livermore. From his observations and interviews with those big-time traders, Wyckoff codified the best practices of Livermore and others into laws, principles, and techniques of trading methodology, money management, and mental discipline.
"We work in irrational markets, an investor who is trying to remain calm and keep their head clear can easily become frustrated or confused by new methods of selection, timing and predicting market movement." Wyckoff advocated a return to basics.
Wyckoff was a stock broker, he saw first hand that βthe basic law of supply and demand governed all price changes; that the best indicator of the future course of the market was the relation of supply to demand.β
Wyckoff was consistently disagreeing with analysts who were using charts for buy/sell decisions, he believed, βStock market technique is not an exact science. Stock prices are made in the minds of men.β
In his opinion, purely mathematical or mechanical chart analysis could not compete with finely developed, practiced judgement. He often ignored financial reports, news items, earnings reports, rumors, brokersβ tips, and was especially scornful of βhalf-baked trading theories expounded in boardrooms and popular books on the stock market.β
Wyckoff believed that an analyst should be a detective, their role is to uncover the forces behind price and volume fluctuations. He was a market psychologist, weighing the human motivations that fuel these moves, and a general who is planning a financial campaign to intercept stocks when the charts showed they were at their most profitable stage.