Using Effort versus Result Analysis to Gauge Supply and Demand Dynamics
The 'Effort versus Result' principle is a classic Wyckoff concept for analyzing the interplay between price action and volume. Observing the effort required to move price provides clues on emerging supply and demand trends.
Why Effort versus Result Matters
Wyckoff analysts pay close attention to the effort needed to achieve the corresponding result in terms of price movement.
When intense effort produces insignificant price reaction, it signals something is amiss about the prevailing trend.
Key Relationships
- High Effort, Small Result - Divergence warns of impending trend change
- Low Effort, Large Result - Confirms harmony with existing trend
How Effort versus Result Analysis Works
There are two sides to this method - comparing volume surges to subsequent price responses AND volume reactions to preceding price action.
1. Volume Spike Follow Through Analysis
A healthy uptrend sees price rapidly advancing after high volume signals institutional buying. Lack of follow through implies emerging distribution.
2. Prior Price Action Reaction Analysis
In a strong trend, even sharp price declines should not witness significant volume selling pressure if the larger trend remains intact. Heavy reactions signal distribution is encroaching.
When both forms of effort vs result diverge, it paints an ominous picture of expanding supply overtaking demand.
Using Effort vs Result Analysis
Monitoring the continuous interplay between effort and result provides objective insights into when supply/demand conditions remain aligned and when they are shifting.
Applying effort vs result analysis confirms the market's true conviction, quickly highlighting when a trend is losing strength so traders can prepare for reversals.
Effort vs result - https://youtu.be/wPp9GqLUK_M?si=azvn_LfY3Oqri1Tm
OPEN FYERS ACCOUNT
- 4 Stages of wyckoff price cycle : Share market malayalam wyckoff analysis trading part 1
- Accumulation Distribution - Supply vs demand : Share market malayalam wyckoff analysis trading part 2
- Effort vs Result : Share market malayalam wyckoff analysis trading part 3
- Intraday price volume analysis : Share market malayalam wyckoff analysis trading part 4
- Trend reversal : Share market malayalam wyckoff analysis trading part 5
- Market tops & Bottom and Weis wave indicator : Share market malayalam wyckoff analysis trading part 6
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