Distribution Schematics
Overview
Wyckoff Distribution is the phase where institutional operators sell their accumulated positions into retail buying pressure. Key events include: Preliminary Supply (PSY), Buying Climax (BC), Automatic Reaction (AR), Secondary Test (ST), Upthrust After Distribution (UTAD), Sign of Weakness (SOW), and Last Point of Supply (LPSY).
Key Concepts
PSY: first significant selling. BC: climactic buying with extreme volume. AR: sharp reaction down. ST: retest of BC area. UTAD: false breakout above range. SOW: Break below range support. LPSY: last rally attempt before markdown. Effort vs. result analysis critical.
Entry Signals
UTAD (false breakout above range) with volume exhaustion on the test, SOW breaking below trading range support, LPSY rally failing at broken support (now resistance), Volume expanding on declines, contracting on rallies
Exit Signals
Stop above the UTAD high, Trail stops using LPSY and declining resistance, Target the measured move (range height projected downward from breakdown)
Best Timeframes
Daily for distribution identification, 4H for entry timing
Pro Tips
Distribution often mirrors accumulation in duration but can be shorter in parabolic blow-off tops. Look for effort vs. result divergences — high volume rallies with little price progress.
More Topics in This Category
The Three Wyckoff Laws
Richard Wyckoff's three fundamental laws — the Law of Supply and Demand, the Law of Cause and Effect, and the Law of Effort versus Result — form the philosophical foundation of the Wyckoff Method. These laws explain why prices move, how far they are likely to travel, and whether a move is genuine or likely to fail. Every Wyckoff analysis technique derives from these three principles.
Sign of Strength (SOS)
A Sign of Strength is a strong rally within or out of an accumulation range that occurs on expanding volume and wide price spread. It confirms that demand has overcome supply and that the accumulation phase is likely complete. The SOS typically breaks above the range's resistance (Creek) and is followed by a Last Point of Support (LPS) pullback.
Composite Man Theory
The Composite Man is Wyckoff's conceptual framework for understanding market manipulation. Wyckoff proposed viewing the market as if a single, all-powerful operator orchestrates every move — accumulating at low prices, marking up, distributing at high prices, and marking down. While no single entity controls the market, aggregating institutional behaviour creates patterns that appear coordinated.
Nine Buying & Selling Tests
Wyckoff's nine buying tests and nine selling tests are systematic checklists that traders apply to determine whether an accumulation or distribution trading range has completed its purpose and is ready to transition into a markup or markdown phase. Each test evaluates a specific aspect of price and volume behaviour within the range, providing objective criteria for entering positions at the conclusion of a Wyckoff phase.