The wyckoff method is one of the tools which technical analysers can use to predict and control the market by analysing data related volume, price action and time which will lead to understanding the demand and supply we're facing in that particular asset. And this will help a good analyst to know when to enter the market and the volume of which he can obtain to be able to control the market at will and also monitor when the demand goes high so he can exit the market with his profit. We'll understand more as we'll break it bit by bit in the subsequent paragraphs. Thanks @fendit for this wonderful opportunity to acquire such a wonderful Technics.
In the article we discussed about the 𝒄𝒐𝒎𝒑𝒐𝒔𝒊𝒕𝒆 𝒎𝒂𝒏 as imaginary representation of the market, that's supposed to help us understand in a simpler way how the different movements are impacting and affecting the fluctuation of prices. In order words it can also be seen as one of the techniques which traders use to manipulate the market.
In my understanding, the composite man can be use by traders to manipulate the market or get other traders to do what they want at the moment by convincing them to buy and hodl a particular coin to enable the demand go high and also sell when the supply is low. If a trader has this knowledge it can enable the trader to make more profit. Therefore I'll say that the composite man is mostly use by whales to control the market, as they'll dip and accumulate when the price is low (bearish) and sell when the price is high (bullish). This technique is really good if one can actually predict it correctly but in order words it's mostly used by whales or wealthy men to control the trend in the market cause it can take effect only when you have the majority of the stake.
To understand the 𝒄𝒐𝒎𝒑𝒐𝒔𝒊𝒕𝒆 𝒎𝒂𝒏 there are four phases which are accumulation, upward trend, distribution, and downward trend and this phases can be use as a technique in analysing the market.
This is the first phase in the 𝒄𝒐𝒎𝒑𝒐𝒔𝒊𝒕𝒆 𝒎𝒂𝒏 in this phase the investor will study the market before dipping in a way that won't affect the price at the moment, this is when the investor will buy at a bearish price and accumulate a larger part of the asset enabling him to be ahead of other investors. This will help the investor to be in greater control of the market so he can decide what will happen at the second phase.
I'm my terms I'll say this is where the manipulation comes in, cause the 𝒄𝒐𝒎𝒑𝒐𝒔𝒊𝒕𝒆 𝒎𝒂𝒏 will tend to make the price hike cause the asset will be scarce at the moment and this will cause rise in the price of the asset thereby attracting other investors making the demand to be higher than supply, and they'll still be investors who'll come in at the increase price to buy and hodl causing reaccumulation, now the 𝒄𝒐𝒎𝒑𝒐𝒔𝒊𝒕𝒆 𝒎𝒂𝒏 will decide his fate in the third phase
Thus is the phase where the 𝒄𝒐𝒎𝒑𝒐𝒔𝒊𝒕𝒆 𝒎𝒂𝒏 unleash his strategies after hodling for specific period, it'll be time to take his profit cause the demand at the moment is high and he'll be smiling to his pocket as he'll be selling his position in the market, trading most of his asset at the bearish price. This is the moment where newbie in the market will loose cause they'll rush to buy at the moment cause of the continuous increase in price not knowing the market might be at it's peak, and the chart will be moving sideways as the 𝒄𝒐𝒎𝒑𝒐𝒔𝒊𝒕𝒆 𝒎𝒂𝒏 will be selling his assets bit by bit until it gets to the fourth phase.
I remember falling a victim, after seeing a coin trending in the market it caught my attention at the moment but ignorantly I was waiting for it to go down Soni can make an entry but the price kept increasing forcing me to buy and hodl. Unfortunately it was at it's peak at the moment but I lack the technique to read the market at the moment. So this is an eye opener to me
Now this is the where the strategy of the 𝒄𝒐𝒎𝒑𝒐𝒔𝒊𝒕𝒆 𝒎𝒂𝒏 comes into action as he has actualised his motive in the third phase by selling most of his assets at a higher price and also dragging other investors to sell of their position at the same time leading to excess supply than demand in the market and this will lead to a bearish price cause everyone will be fighting to sell off their asset and the price will start going down cause only few people might be willing to buy at the moment.
Just like I said earlier, after buying at that high rate I was disappointed as the price started sinking, I felt doomed. So this strategy is best used by the whales to make excessive gain from novice. I like the strategy cause of one has it he can be able to manipulate the market though it can be disastrous for a starter.
This method is base on three fundamental laws, supply and demand, cause and effect and law of effort vs result. I'll take them bit by bit and explain all in the next line.
This is one of the popular law in economics, as it's use by traders to determine the chart and price of a commodity. The law of supply and demand states that the higher the supply the lower the demand and price, and the higher the demand the higher the price and lower the surprise.
In this situation we can clearly see that the law of demand and supply play important role in price determination, when place on graph. Just like many crypto suffer bearish this past weeks cause of the much supply and less in demand. As we talked about in the composite man after the accumulation by the whales they'll tend to push the price to go higher and this will involve other investors coming in to secure their spot (reaccumulation) thereby skyrocketing the price, and during the supply the price will go low cause they're few people willing to buy at the moment. That's why BTC, Eth and the rest were affected after reaching it's peak. The whales were selling and every other investors decided to join and sell at the same time thereby causing a fall in the market price.
This law states that nothing happens in the market without a consequence. Just like the first law (demand and supply) they both has it's consequences. The law of demand causes a rise in the price of an asset while the law of supply causes a fall in the price of an asset, and clearly we can see that both action has it's consequences.
This law on the other hand gives a broader vision to help a trader or an investor to know when to enter the market and when to exit. In a science term we can say that every action has equal reaction. When there's a massive accumulation of Bitcoin it'll cause the a rise in price and a higher demand and when the supply gets much it'll cause a fall in price.
This law shows the connection between the volume of the asset and the price effect. In the market for one to be able to control the price action that means he'll hold the larger volume of the asset. When place on a chart, we'll see that the higher the volume the bigger the effort.
That's to say high volume requires big effort and low volume will be equal to small effort or side movement on the price chart. That's why the whales control the market more cause they have a higher volume of a particular coin unlike other minor traders.
𝘼𝙘𝙘𝙪𝙢𝙪𝙡𝙖𝙩𝙞𝙤𝙣: The diagram above shows a fall in the price of XLM you and the investor was busy monitoring the market so as to know when to enter the market. And being a good analyst he clearly understand when to enter, and he made a lot of accumulation this time before other investors enter the market.
𝙐𝙥𝙬𝙖𝙧𝙙 𝙏𝙧𝙚𝙣𝙙: This investor being a good analyst clearly understand the market and now he'll hodl his position as the price start trending and this will attract other investors to come in and there's reaccumulation which will attract them the more making the demand high
𝘿𝙞𝙨𝙩𝙧𝙞𝙗𝙪𝙩𝙞𝙤𝙣: in this phase we can clearly see that the demand is increasing and the investor is selling some of his asset attracting other investors to sell their assets and this chart we can see the price going up and reaching it's peak before following a down trend which we'll discuss in the next phase.
𝘿𝙤𝙬𝙣𝙩𝙧𝙚𝙣𝙙: in this phase the market will take a pause and start falling due to excess supply just as we mentioned before and this will affect the price of the asset thereby causing a fall but according to the chart above we can see that the fall didn't last for so long before climbing again. At this moment I can say there's a bit reaccumulation by investors with a foresight perhaps observing that many are still hodling their position and this is followed by a sudden hike.
This lecture has clearly given me a tips on how the whales control the market with their strategies. Though the market is too volatile and broad making it hard for an ordinary trader to know when to enter and when to exit. And considering how the fundamental laws of the composite man works. It shows that the higher the volume the bigger the effort, so when you have a large accumulation of the asset, this can empower you to decide what happens to that particular asset since you're hodling the greater volume. Though this strategy is not always accurate just like what happens in the chart I presented above, the investor was selling when the demand became high causing others to join him and at some point they was a bearish in the price making a little pause probably a chance for reaccumulation before it escalates. Same thing happen in sometime between February and March when Elon musk purchased a large volume of Bitcoin and we saw Bitcoin climbing to it's peak before falling gaining a little momentum at some point but that didn't last before it's crash in price which put it to where it is today paving way for accumulation and a possible rise sometime soon.