Crypto Academy Week 16 Homework Post for @fendit | The Wyckoff Method

Hello steemians, good day everyone. Today brings us another episode in the crypto Academy community. Before I present my homework post, I would like to acknowledge the professors and the crypto Academy community for making such a wonderful poject. Today's topic is quite interesting The Wyckoff Method. Thanks to @fendit for making such an educative lecture possible.

Without wasting enough time, I would present my homework post systematically based on the questions from the professor.

Introduction to Wyckoff Method

The Wyckoff Method is a technical analysis tool which was invented by Richard Demille in the early 1930's basically to help traders and investors in the stock market. The method is was created to be used by great traders in the stock market for better investments. With the Wyckoff's Method, a deeper understanding and a good study of supply and demand of an asset is needed. Just like all other strategic method in the crypto world, the Wyckoff Method is not 100%. More research could be done to guide you.

The Wyckoff Method cycle
From the Wyckoff Method, the methods states that the price moves in a cycle.

• Accumulation
• uptrend
• distribution
• downward or markdown

1. Share what you have understood about "Composite Man" and the fundamental laws. What is your point of view on this?

Composite Man

Basically, when we talk about the composite man, It just an imaginary representation of the of the entire stock market which is controlled by traders, organisations and investors as just one body. Wyckoff proposed to the traders and investors that, they should study the entire market as if it was controlled by one body to make is easier for them to understand the trends of the stock market. The current price, the charts, the markets capitalization, the dominance, volume etc. All should be assumed to be controlled by just a single body.

During price consolidation, that is the ups and downs of the price of the stocks or assets, the composite man takes securities in a sequential process.

The composite man technique could be very profitable and very useful is studied very well. Beginners are not advised to use this technique in tradings because it could be very costly. However, this technique is only used by experts in the stock market who have studied trends for a long time.

The Composite man's technique uses four phases to complete its cycle.

a. Accumulation

The Accumulation is the first phase in the Wyckoff's Method. With this phase, the composite man start to accumulate more assets before other investors at a relatively lower prices compared to the others. After the other investors have purchased the assets, the composite man then predict the possible prices to make profits. However, with the Accumulation stage there's no significant change in price consolidation. Which literally makes the graph more or less regular.

b. Uptrend/mark up

After the Accumulation in the first phase, since the composite man holds enough of the assets, the people selling the assets would reduce which would cause the price of the assest to move higher. As the price starts to move higher, the assest would attract more investors to invest more since the asset is showing more potentials. There demand starts to increase. Causing the price of the assest which was initially purchased by the composite man to move significantly high.

c. Distribution

At this stage, the composite man has already achieved his sole aim. Since the price has moved significantly from what he initially purchased, the composite starts to sell his assets to take profits. The composite man has already made a lot of profit from his strategy and thinks its enough.

d. Downtrend

This is the final stage of cycle. From the previous stage, we realise that the composite has distributed all his holdings. This would cause a massive drop in price of the assests which would cause the downtrend. The supply of the asset would increase. Probably exceeding the demand of the asset. Which would cause the fall in the price of the asset.

facts about the composite man

With the composite man, I think its one of the best strategies. Controlling the entire market to benefit yourself is a very smart way of working. The idea may seem selfish but as a determined investor, the first motive is to know the best and easiest way of earning.

The fundamental laws of the method

1. Law of demand and supply

The laws of demand and supply is very common in the crypto world. Demand and supply alters at a result of each other in a reciprocal way. In the crypto world, if the demand is high, It push the price of the assest to increase there by increasing the profits of the investors. However, if the supply is relatively higher than the demand, the price begins to fall. Therefore the higher the demand the higher the price and if price increases, profit increases.

Example looking at the dogecoin im few months ago, elon musk tweeted about the dogecoin which pushed the interest of more investors to hold more of the dogecoin. Later, because the demand became higher than the supply, it pushed the price to increase massively.

2. The Law of Cause and Effect

In the crypto world, the volatility in the prices of assests is being triggered by some action of investors on the market. From the Wyckoff's Method, the Accumulation would result in the uptrend meaning without the Accumulation of the assets, there would be no uptrend with signifies that, the Accumulation cause the uptrend effect. Likewise the distribution and the downtrend. The distribution has cause the downtrend in the sense that, without the distribution there would be no certainty for a downtrend.

3. Law of efforts and results

Wyckoff's 3rd law states that "the changes in price are a result of an effort, which is represented by the trading volume." In other words the trading volume of the assets and price of the assets determines the trends of the market. The trends is determined by the prices and volume of the assets. Hence when both the price and volume of the assets differ from one another widely, the current trend is most likely to change.

2. Share a chart of any cryptocurrency ( I will not accept BTC or ETH as examples in this task ) and analyze them using this method. It clearly shows the different phases, how the volumes change and gives details of what you see.

1. Accumulation

Looking at the dogecoin chart above, we realise that in the Accumulation phase, there is no significant changes in the prices. The changes in price at this phase ia negligible. The movement of the graph has significant effect in the price of the Dogecoin.

2. Uptrend

From the 2nd phase, we realised there's a significant increase in price. The price moved from below $0.3 to above $0.6 from the chart. Which show a very significant increase. More than twice the price of that at the Accumulation stage.

3. Distribution

At the distribution phase, we realise the uptrend has ended and the downtrend has began. Which indicates that the dogecoin is currently at the distribution phase where the composite man sold all his holdings for profits.

4. Downtrend

At this phase, we realise the price of the assest is hitting down massively. Which indicates a downtrend in the Wyckoff's Method. We can therefore conclude that the composite man has sold all his profit which is causing the price of the Dogecoin to fall.

Conclusion

Although the Wyckoff's Method is one of the best methods,I still don't recommend this method for beginners in the crypto market. This method requires great experience and patience to study. The Wyckoff's Method could also be the best trading strategy for traders who study this method very well. Over all I would thank at @fendit for such a wonderful lecture.