Setup: Wyckoff spring
Lesson 38 of 39 in the course “Crypto”. Free, with animations and a quiz.
The Wyckoff method is a way of reading charts named after an early 20th-century trader. Condition: a long range after a drop. It may be accumulation: big buyers quietly building a position.
Price pokes below the bottom of the range and quickly comes back. That is a spring: a false break down that knocks out stop-losses and scares sellers.
A spring appeared. When do you enter? Answer: When price returns into the range and closes higher. Answer: after the return. A close back inside the range confirms the break was false. On the poke itself it could still be the start of a drop.
Enter on the return into the range. SL (stop-loss, auto exit at a loss) below the spring low. TP (target): the rise after price leaves the range. In Wyckoff terms that phase is called markup, the price run-up.
Price leaves the range and rises. You can take part of the profit at the top of the range. Cancel: a candle closes below the spring low.
Check yourself
- When do you enter on a spring?
Correct answer: After a confirmed return into the range. Confirmation filters out the cases where the poke turns into a real drop. - Where is the SL when entering on a spring?
Correct answer: Below the spring low. A new low below the spring means the break was real. The idea is cancelled. - What makes this setup attractive?
Correct answer: A short stop, and the target can be far. There are no guarantees. But the stop is close and the target is far, so the R:R, the ratio of possible profit to risk, is usually high.