Reversals and mean reversion · Advanced
Wyckoff spring
In an accumulation range, price dips below support to shake out weak holders, then snaps back. Buy the test of the spring.
Richard Wyckoff, a pioneer of technical analysis in the early 20th century, described how large operators accumulate positions in a trading range before a markup. The spring is the final shakeout below the range that traps sellers just before the advance.
Why it works
Large buyers cannot buy all they want at once without driving the price up, so they accumulate quietly inside a range. A spring below support triggers stops and panic selling, which provides the liquidity they need.
If the break below support has no follow-through and price quickly returns into the range, supply has been exhausted.
The rules
Setup
- A prior downtrend that stops (selling climax, automatic rally) and turns into a sideways range.
- Support defined by the lows of the range, tested several times.
Entry
- Spring: price breaks below support and quickly closes back inside the range.
- Conservative entry: wait for a test, a retest of the spring area on lower volume that holds, then buy.
- Further confirmation: a sign of strength, a rally to the top of the range on rising volume.
Stop loss
- Below the low of the spring.
Exit and management
- First target at the top of the range; the markup can continue far beyond it.
- Trail under the higher lows of the markup.
Filters that improve it
- Volume on the test should be lower than on the spring itself: that shows supply drying up.
Worked example
Illustrative example on gold, 4H: after a decline, gold ranges between $2,280 and $2,340 for two weeks. A candle drops to $2,268 and closes at $2,286, back inside. Two candles later a test at $2,281 holds on low volume. Buy at $2,290, stop at $2,265, first target at $2,340 (2R).
Illustrative numbers, not a recommendation.
Common mistakes
- Calling every break of support a spring: if price stays below support, it is a breakdown.
- Buying in the middle of the range, where the risk is unclear.
How to practise it
In Candlemind, look for ranges after a decline on 1H or 4H. When a wick breaks the lows and the candle closes back inside, mark the low and wait for the test before entering.
Pre-trade checklist
- Range after a downtrend (accumulation)
- Break below support that closes back inside
- Test holds on lower volume
- Stop below the spring low
- Target the top of the range
Frequently asked questions
What is a Wyckoff spring?
A false break below the support of an accumulation range that quickly reverses, shaking out weak holders before an advance.
What is the opposite of a spring?
An upthrust: a false break above the resistance of a distribution range before a decline.