Glad to be back once to mingle with the beautiful people of this community. I am continuing in my homework task for this week. This time i will be writing the assignment of @fendit with the topic - The Wyckoff Method.

Share your understanding on "Composite Man" and the fundamental laws. What's your point of view on them?

The idea of Composite Man and its accompanying Fundamental laws came into existence by a man known as Richard Demile Wyckoff through his technical theory known as Wyckoff Method. The idea propagated by this man was made for the benefit all traders and investors in the stock market and in extension the financial markets. His technical analysis aims to assist traders and investors identify the best time to enter a long or short trade, assets that work in harmony with the market, mitigating or reducing the risk traders are exposed to.

Composite Man

Wyckoff explained the actions of all the various stocks in the market as one man's doing. This man he named a Composite Man. He believes that this man is the one behind all that happens in the financial market, controlling and determining the events that goes on there.
This Composite Man is a representation of what we refer to as whales in Crypto, who may be institutional investors and wealthy individuals that carefully plans and carry out their plan to achieve their selfish interest in the market.

So these group of wealthy individuals and institutional investors determines the rise and fall of a particular asset, taking huge profits in this process. in the process of carrying out their selfish plans and executing it, little investors lose there hard earned money in the process. So i would say, that the method employed by the Composite Man is self centered and selfish. However. for the small investors to reduce the risk of loss and make some profits in the market, they need to study and apply this technique during analysis and flow with the direction or trend in the market.

Phases of the Composite man technique

there four phases that must take place in market based on this technique.

These phases are

1. Accumulation

During accumulation phase, the Composite Man buys and stores as much assets as possible, accumulating as much as possible before other investors starts coming in. at this stage, we dont have much change in the price and volume of that particular asset. The composite man in doing so is always a step ahead of other traders or investors in the market. this definitely gives him an edge going further.

1. Uptrend

Let us remember that in the accumulation stage, the composite man buys up large chunk of the asset, thereby causing artificial scarcity in supply of the asset. as the law of demand and supply goes, due to less supply and much demand the price of that asset will go up. this brings about more volume and upward price movement, thus catching the attention of other investors, who also tries to coming in and buy the said asset, creating more demand in the process.
At a point during the uptrend, there might be another accumulation phase, however, it will be shorter than the previous one.

1. Distribution

At this the stage, the composite man starts reaping the fruitage of his investment. He begins selling his assets in a systematic way such that demand will continue to outweigh supply, pushing the price further; until he sells the final ones at a very high price. At this point, the composite man had made so much profit at the expense of the late investors in the asset, as we will see next stage.

1. Downtrend

By the time the late investors come in and the price is at its peak, The composite man would have sold off all his assets. He will then initiate the process of pushing down the price again. Let us bear in mind that we now have so many investors and supply is really on the high side again. Thus, the economic of the demand and supply come in again. The late investors will now start panic selling of their assets to reduce their losses. this pushes the price further down bearing about extremely bearish situation.

Meanwhile, the composite man waits until the asset get back to the least market price where demand and supply equals itself, then another stage of accumulation by them begins.

What's your point of view on them?

I would say that having a positive or negative view is dependent on the side of the coin you belong to. For the institutional investors and wealthy individuals who make up this composite man, they use it to there own advantage. Using there hard earned money to get influence and dominate the market. The retail investors will be on the losing side unless they also apply this strategy, which is the most reasonable thing to do. A saying goes this way if you cannot beat them, join them. it is exactly true in this case.

The Fundamental Laws

The fundamental laws that govern this strategy are as follows

1. Law of demand and Supply

Like i have stated earlier, this Composite Man method strictly follows the economic law. The concept is that if there is high demand prices will increase, but if the supply is higher, prices will fall. When applying this strategy. there is need to consider the volume and price chart of that assets. this will definitely help us to determine at what point the market is.

Law of Cause and Effect

The law states that there is a reason for everything that happens. thus in the financial or crypto market, there is a cause for whatever effect or condition in the market. So for the price to rise there must be a cause, in this case, the cause is Accumulation. So accumulation leads to increase in price.
On the other hand, distribution is a cause that leads to bearish or downward trend in the market, which is the effect.
Thus we can conclude that for every movement in the market does not just come by chance, but have a cause.

Law of Effort and Result

This gives an early signal of a possible reversal in the direction of an asset. Whenever there is no much correlation between volume and price, a change in direction is in the offing.
Actually increase in volume normally matches increase in price. So when price is increasing and volume is reducing, it is an indication of a reversal in trend.

Share a chart of any cryptocurrency of your choice (BTC or ETH won't be taken into account for this work) and analyze it by applying this method. Show clearly the different phases, how the volume changes and give detail of what you're seeing.

I am using the chart of XRPUP/USDT to illustrate this strategy.

[screenshot](from my binance account)

1. Accumulation

From the screenshot above, it commendable to note the volume during accumulation. it was consistent maintaining its level. We did not have anything like a sharp upward or downward movement. at this point, the Composite man is busy buying the asset or coin.

2. Uptrend

In this phase, there starts a gradual increase in price, it moved until it got to a point where it begins a re-accumulation, after that point the bullish trend continues in full earnest.

3. Distribution

At this stage, the Composite Man is a very happy man. The price of the coin reaches its peak stage. he now starts selling off his coins to other late investors and making huge profits. from the screenshot above, it did not as much time as did the uptrend phase, gradually the downtrend began.

4. Downward or bearish trend

This the last phase of the cycle, the gradual decrease in price is noticed in this stage until it gets down finally. It got to a point where it started re-accumulation before it finally pushes down. At this point the Composite man is standing by to start buying again in the accumulation stage, when it reaches the end of its fall in price.

Conclusion

This strategy and technique clearly favors the rich and the institutional investors, since they manipulate the price to their own favor. However the retail investors can benefit from this too. They only need some time to study and systematically select stocks which captures the interest the interest of the Composite man, thereby moving along with him early rather than being on the wrong side of market and losing funds.

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