the wyckoff method
The wyckoff method was created by a man named Richard wyckoff in 1920's he name the analysis wyckoff from his name "richard wyckoff". He died 14 years after creating the wyckoff method but his methis still lives on.
The wyckoff method analyse data through volume, price, action and time.
Richard wyckoff before he died made mention that the best time to go long is when price is about to reach the end of an accumulation area and price is about to go up, while the best time to go short is when price is about to reach the end of a Distribution area and price is about to go down. His concept was also based in the trans of the marked if it's either in an uptrend or in a downtrend.
From our basic knowledge of demand and supply
Demand can be defined as the ability and willingness of ana individual to purchase a good at a particular price while supply is the ability and willingness of sellers to dirstubute good at a particular price.
The accumulation can also be said to be the demand area cause at this area price moves up while the distribution area can also be said to be the supply area cause at the area price falls down.
The wyckoff method brought about the composite man.
The composite man is actually not real but rather an imagination, the concept about the composite man is that the market is monopoly (it's controlled by one person) and makes price move to his advantage.
The composite man controls the market tells traders when to buy or sell as a smart trader you should follow to the composite man cause hey!! he controls the market so when he says you should buy you buy and when he says you should sell you sell. He will accumulate an asset when the price is low and make traders to buy so when the price increase they all make profit while traders that entered the trade late will make less profit or even loss.
The composite man man performs 4 phase
Accumulation: this is the first phase, he accumulates an asset when it's low before other investors gets in and so when the price of the asset rise there would be a profit for the investors just like I said earlier.
Uptrend: this is the second phase, after the composite has have gathered enough asset he then makes the price to goes up, other traders too could buy the asset as they see price going up at this period price goes up demand is higher than supply. During the increase in price the composite man also accumulate more of the asset this is called re-accumulation.
Distribution: this is the third phase, at the phase price goes sideways again cause the composite man has noticed the price has reached its maximum for the time been so he starts to sell his asset and other traders too follow the same step.
Downtrend: this is the fourth phase, at this phases the composite man has successfully sold all of his asset and at this same phase the supply is greater than the demand which leads to a downtrend
There are 3 fundamental laws to the wyckoff method
law of demand and supply
Demand and supply affect the direction of price cause if there is an increase in demand the volume and price will rise and if there is increase in supply the price will fall.
When the piece of an asset is low traders tend to buy more of it which triggers the price to rise and when the price of an asset is high traders would want to sell them cause they've made their profit form it already the. The selling of the asset by many traders would make the price to fall, so this concept just keep repeating itself.
The law of cause and effect
Just like the word "cause and effect", the change in price direction is triggered by something we know as the cause while the fact that the price direction changes is the effect, so what this law is saying is that for every buying and selling in the market it will lead to change in direction of price. Like the senerio whereby the composite man bought a large number of an asset when it's low and other trader indulge in the same act which make the price of the asset to go up, The buying here is the "cause" while the change in price direction is the "effect.
Law of effort and result
Effort is caused as a result of increase or decreay in volume, when there is high volume there will be a big effort and when there is a small volume there would be a small effot.when there is an increase in the volume price direction bwill change , if there is an increase in the volume of buy there will be an uptrend and if there an increase in the volume of sell there would be a downtrend.
The image above is the chart of doge/USDT on a 4hrs time frame.
Accumulation: from the image above we can see how the composite man bought alot of the asset when it was stillnlow, I labeled the part accumulation, we can also see how price was moving sideways.
Uptrend: after the composite man has stock up a lot of the asset and other trader joined him in doing so, we could see how price change direction and moved upward, even if we check the volume they are mostly long and green which signifies an uptrend also
Distribution: when the price was done reaching the maximum we can see how it began to move sideways also just like the accumulation did, this is because price has reached its highest and the composite man has started selling his asset
Downtrend: this is the last phase of the composite man, after the composite man and other traders sold Their asset the price fell which caused a downtrend and as we can also see in the image the volume there were mostly red
Alot of people might see the composite man as a selfish person although it's and imaginary person though, but come to think of it, if it was a real person and you were the person wouldn't you do the same? The wyckoff method is also a great indicator cause it predicts the direction of price through volume. Thank you sir @fendit this was really a good lesson, I've read through your lesson and I've done the homework to the best of my understanding.