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Mastering Market Timing with Richard D. Wyckoff and Lyman M. Lowry: The Analysts and Their Methods

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The authors discuss the market timing methods of Richard D. Wyckoff and Lyman M. Lowry.
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Richard D. Wyckoff

The technical approach to investment analysis dates back decades, if not centuries. In contrast to the fundamental approach to market analysis, which focuses on identifying the intrinsic value of a company and its future growth potential by utilizing such metrics as earnings, debt, and management prowess, technical analysis focuses largely on the study of price action. Technicians work under the assumption that security prices move in trends. The identification of those trends, in turn, can be used to forecast future price action. Early pioneers in the field of technical analysis include some well-known names such as Charles H. Dow, Ralph N. Elliott and William D. Gann. Perhaps lesser known are technicians Richard D. Wyckoff and Lyman M. Lowry. While icons in their own right regarding their contributions to the field of technical analysis, various writings on these two individuals indicate they were both very much students of the market. Another common thread between these two technicians was that both regarded the basic Law of Supply and Demand as the key element in their approaches to the analysis of stock market trends.

Richard D. Wyckoff began his career in 1888 as a stock runner at the young age of 15. By the age of 25, he had gained enough hands-on market experience to open his own brokerage office. From his perspective as a broker, Wyckoff was able to view the buying and selling patterns of the large market players. By doing this, he "realized it was possible to judge the future course of the market by its own action...that the action of stocks reflected the plans and purposes of those who dominated them...that the 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 and Demand."1 It was on this foundation, the Law of Supply and Demand, that Wyckoff based his method of forecasting the future direction of the market.

Wyckoff enjoyed great success in his forecasting technique and, as a service to his clients, published The Ticker Magazine. This publication's name was later changed to The Magazine of Wall Street, and Wyckoff's superior analytical and predictive abilities resulted in the largest circulation of any financial publication in the world at the time. In 1928, Wyckoff turned his business over to associates and, in 1931, his method of stock market analysis was published as a correspondence course. Wyckoff deemed this course "the cream of what I have learned in 40 years of active experience on Wall Street."2 This course remains in existence today through the Stock Market Institute, based in Phoenix, Arizona.3 The foundation of this course is the same now as it was in the 1930s, and that foundation is the Law of Supply and Demand.

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