I recently finished reading Wykoff’s classic work and only then realized how restless I’ve been in the market all these years. To be honest, this theory has been circulating for nearly 100 years, yet I’ve only started to study it seriously now—no wonder I’ve been losing so badly.

First, let me talk about the most painful point: manipulators do exist in the market. Just think about it—if they can make money, capital must inevitably flock in. In a zero-sum game, the side with more resources has a better chance of winning. The reality, however, is that most retail investors are losing money, which perfectly matches the 80/20 rule. There are basically three tactics manipulators use: first, they waste your time, making you stay and bleed at the bottom until you can’t stand it anymore and cut your losses—only for it to rise right after you turn around; second, they launch surprise attacks on the price, luring longs at the high level and smashing the market at the low level, repeatedly tormenting you; third, they create a hall-of-mirrors using news and public opinion, so retail investors’ emotions move along with the rhythm.

What’s most interesting is that the trading logic of retail investors is completely opposite to that of the main players. Retail investors spend all day watching technical indicators, news, and fundamentals, while the main players only look at three things—price, trading volume, and the speed of change. Retail investors buy and sell based on indicator signals, but the main players focus on supply-demand relationships and the market’s own behavior. The most crucial difference is that retail investors don’t have a risk-management mindset, so they end up getting trapped; meanwhile, the main players always put risk control first.

So how can that “smart” small capital see through these tactics? The core of Wykoff patterns is studying supply-demand relationships. Without technical indicators—just by looking at the fine changes in price and trading volume—you can identify whether the market at the moment is supply-led or demand-led. When supply is abundant, prices fall; when demand is abundant, prices rise. We only do the demand-led phase. And volume and price must match in order for a trend to form. When volume and price diverge, it often means something abnormal is happening—so you need to be especially cautious then.

Wykoff patterns also emphasize a concept called cause-and-effect. Volume-price divergence is often a signal of an impending trend change, but this process doesn’t happen instantly. True “bottom fishing” isn’t just the first two candlesticks with breakout volume and bullish candles—it’s about going through a sequence: “maximum-volume selling → low-volume testing → consolidating to drive away floating positions.” So when an abnormal volume-price relationship appears, don’t rush in—observation and tracking are necessary.

Another important perspective is watching the boundary of support and pressure. Near support and resistance levels, you should closely monitor changes in volume and price. Especially cases where there’s heavy volume but small oscillation, or big bearish or big bullish candles, often indicate a potential shift in the outlook. A single large bullish or bearish candle with heavy volume is itself a new support or resistance.

When it comes to Wykoff patterns’ global perspective, the most enlightening part for me is his five-stage breakdown of the process of a bear-to-bull transition. First is the accelerated decline phase, where retail investors panic and sell. Then comes the range-bound consolidation, with the stock price repeatedly moving within a certain range. Next is the “spring” effect—rapidly breaking to new lows but then quickly snapping back. After that, strength first shows up, with rising on increased volume and pullbacks with reduced volume. Finally, it enters the main advance range. The structure of the bull-to-bear transition is completely the opposite.

After learning these, my trading approach has changed quite a bit. First, when looking at stocks, I’ve developed the habit of stretching the time axis—locating my position within the entire operating cycle—so I can have a global view. Second, my sensitivity to phenomena like panic selling, key support/pressure points, and the spring effect has increased. Previously, when price approached resistance levels, it was easy to rush in; now I patiently wait for confirmation of a breakout. Third, I’m more confident in holding-time and position management—especially during consolidation periods, instead of going all-in at once, I build positions in batches, adding more when the spring effect or a second low testing appears.

But when using Wykoff patterns, you also can’t be dogmatic. Panic selling and a second test aren’t guaranteed to happen every time—they could also happen three or four times. Still, there’s one belief that matters a lot: the longer the distribution/accumulation time lasts, the higher the rebound can be. This theory works across different cycles, and especially in consolidation periods, you should pay more attention to timeframes below the daily chart.

The most core thing in trading is timing. Wykoff believes there are three buy points worth watching: first, a bearish candle with no volume, indicating that supply has been exhausted; second, after a sustained decline, a second test of the selling climax—or afterward—when selling pressure clearly diminishes; third, when demand begins to enter and shows up with rising volume, and there has already been a certain degree of upside. This is right-side trading.

Crisis management is also equally important. All trading forecasts are based on guesses about volume-price phenomena, so they can never be 100% accurate. If you judge it wrong, you need to exit quickly—this kind of execution discipline is crisis management. I think you need to do three things: set a stop-loss line for every single buy, and once it triggers, immediately accept the loss and leave; manage entries and exits in batches to prevent failure; and closely monitor structural breakouts—especially the case where a large bearish candle breaks down and the second candlestick doesn’t pull back—where you must decisively exit.

At the end of the day, trading isn’t a numbers game; it’s a psychological contest of willpower, endurance, and vision. Only by continuously improving your level of understanding and trading skills can you last longer in the market.