Cause and Effect
Volume Price Analysis glossary · Wyckoff'S Laws & The Four Market Phases
Definition
Wyckoff's second law: the magnitude of a price move is proportional to the duration and intensity of the preceding consolidation.
Cause and Effect in plain English
This is Wyckoff's idea that big results come from big build-ups: the longer and more energetically a price 'coils' sideways in a quiet range, the bigger the move you can expect when it finally breaks out. The sideways range is the 'cause' (smart money slowly loading up or unloading), and the trend that follows is the 'effect.' Picture winding up a toy car — the more turns you crank into the spring, the farther it zooms when you let go. A tiny, brief pause tends to produce a small move; a long, drawn-out battle tends to launch a big one.
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