Steemit Crypto Academy - Season 2-Week 8| The Wyckoff's Method| homework post for professor @fendit by @noraiz

Hello everyone! In this week, the professor @fendit explained Wyckoff theory which consist of some of rules. Richard Wyckoff Introduced this principle to the world. This theory help the investor to increase their profit. The traders can minimize the risk and loss ratio to the great extent by following the rules and techniques of this theory.

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

Composite Man

The Richard Wyckoff introduced the concept of Composite man. We know that there are some investors who act as supreme investors. They play a very vital role in shaping the market. The composite man is actually representing the man which is making the market by his moves. He make investment in the downtrend of market and sell his invested assets when market goes up. If a person analyze the crypto market deeply and make investment according to the strategies of composite man, he can earn the high reward .

In other words, the main idea of composite man is that investors should think that the crypto market is controlled by a single crypto currency. This will help the traders to understand the market trends. They can then easily determine whether the market is going up or it is downtrend period. The market movements then can easily be determine by the investors and they can decide whether or not they should invest in crypto market. If a person read each asset thoroughly and analyze it in order to get the idea how the assets is behaving in market. The thorough study would help the investor to understand the reason of domination of this asset by the market makers. The Wyckoff said that if an investor read and analyze the market deeply and understand the behavior of market maker, he can get more opportunities to earn profit and get high reward by investment in crypto world.

There are basically four main steps in the composite man cycle.

Accumulation

This is the first phase of composite man. Here the market maker accumulate the crypto currency. In this phase the side movements are occur. The market maker accumulate asset at its down trend. The accumulation process is done gradually while the price and volume remain down. Just like when the market goes down and asset price decrease, the investors start investing in that asset. Just like that, the market maker start accumulating the asset when asset price is low.

Uptrend

This phase is also known as reaccumulation phase. When demand is high, the price of coin getting increase. After accumulating the enough assets, the composite man then push the market toward its uptrend. The ratio of asset selling goes down and the demand is high because of low price. These price rise and fall attract the investors toward investing in the asset. The demand than goes high as compare to supply. This increament in demand attract more investors to invest.

Distribution

In this phase, the holding assets are distributed by market maker. A move is taken by composite man here where he start selling the assets which he have bough in first phase of composite man cycle. As the price reach to maximu level, so investor start selling their coin in this phase. The composite man start sell the assets which he had bough during accumulation. The investors who did not buy the coin first start buying in this phase. So demand and supply ratio become equal.

Downtrend

This is last phase of composite man cycle. In distribution phase, the composite man sold a huge portion of his holding. The remaining assets will be sell in this phase. The market downtrend will start here. The supply ratio will exceed the demand ratio. As supply is more than demand, so the price of asset will fall and market downtrend will start.

^Source

The Richard Wyckoff named this theory by his own name. This theory is actually consist of a number of rules and strategies. The Wyckoff theory consist of three basic laws.

• The Law of Supply and Demand
• The Law of Cause and Effect
• The Law of Effort and Effect.

1) The law of Supply and Demand

The price of any asset is determine by its supply and demand ratio. We know that market goes and and rise everyday. This market trend is change because of demand and supply of asset. The market goes up and price of an asset rise rapidly if the demand get high and supply of that asset is low. This show that the market is uptrend. On the other hand if the supply is high and demand of an asset is low, the price of that asset fall and market downtrend start there. When the demand is high and supply is low, there are more buyers in the market. But when the demand is low and supply is high, the price fall and there are more seller as compare to buyers.

Example

We experience this law in our daily routine too. We see that in market, the shopkeepers some time stop selling the some product like sugar. The supply get short for customer. This create a rise in demand for its short supply. The shop keeper than rise the price and start selling. The customer then buy the sugar even at high price. Another example is when the season change, the demand of closet also change. If its winter, the demand of warm dresses get high. As demand is high, the price will also get high. In summer the warm dresses are not demanded by customer so its price is low.

Supply greater than demand= low price
Demand more than supply= High price
Demand equal to supply= Price remain constant

2) Law of Cause and Effect

This is second law of Wyckoff method. This laws shows that the difference between demand and supply is because of some specific reasons. The demand and supply is the first law which has some specific stages such as preparation, cause, result. The causes are created in the first preparation phase. Then the relationships get effected. This law is being used by the traders in setting the asset price. The traders measure the market trend and determine what will be the price of asset.

We know that every actions has a reaction. The action is cause and the reaction is effect. When the accumulation period end, the price start rising because of more demand and less supply. This effect the market positively and uptrend start there. When the distribution phase ended, the demand is less than supply than. This create a downtrend in market and cause of decreament in price.

Example

The accumulation causes an uptrend in market. The uptrend cause a downtrend in market.

3) Law of Effort and Results

We know that when the price of any asset change in crypto market, it bring a change in volume too. The crypto market change every time. It goes up and fall again. These movements of market continue unless the effort and result are compatible to each other. The trading volume of any assets shows that When an effort effected, the price of an assets goes up or fall down. The trend of market are continue unless and until the price of asset follow its volume.

What's your point of view on them?

The crypto market is versatile. The market goes up and down. The price of an assets sometime rise and in other time fell again. The investors invest money in crypto market after analyzing the market. If price is high, the investors sell their invested assets. If price goes down, the downtrend started there and investors buy the assets then at low price. This is explained in composite man and Wyckoff's laws in well way.

The Wyckoff method has multiple phases and these phases help the investor to get to know about the market trend. They invest money in market when its bullish period and sell their invested assets when the bearish phase start. The Wyckoff method provide the better understanding of market to the investor.

The market is studied thoroughly before applying Wyckoff method. The investor have to analyze the market. This analyzes show whether the market is going up or going down. We know that when the price of any asset goes down, the accumulation phase start there. The investors buy the coin at low price. When the price rise up, the uptrend phase start. The investors sell their coin at high price and earn reward. The third phase , distribution phase, is start when the price started felling again at end of Uptrend phase.

In distribution phase, whole assets are sold by investors. They sell their invested coin in distribution and uptrend phase. Then the price starting going down. The downtrend start there. When the price goes down, the supply increase and demand decrease and investors again start buying the assets at low price.

This trend also make us to understand the Demand and rise law deeply. There are multiple phases of demand and supply law. When supply high than demand, the price goes down. When demand is high than supply, the price goes up. Demand and Supply law actually shows the bull or bear period of market.

If the strategies and rule of Wyckoff method follow properly by investors, they can earn good profit.

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.

^{Screen short from my binance account}

Accumulation phase.

In the above screen short, the accumulation phase is shown with red mark. In this phase, the price is low. The investors take the benefit of this downtrend and buy the assets to sell it later at market uptrend at high price. We can see here that the bearish phase is here with low price of assets.

Again the accumulation can be seen in graph before second uptrend. The investor buy some more coin in this phase

Uptrend

After accumulation phase, teh market start rising. The price of coin goes up. You can see that the market is rising with multiple green blocks and a few red blocks are there while market uptrend. Here the price get high. The investors take the benefit of this high price and start selling there assets.

Distribution phase

The behavior of volume in distribution phase is same as accumulation phase. But here the difference is the market is at uptrend here. The Price is at its peak. Here the investors sells their remaining holding and get the high profit.

Downtrend

You can see that the way the volume shown here. As teh investors sold all their invested assets in distribution phase, so the demand get less than sully at this phase. The price so start falling. The market downtrend start here.

Conclusion

We know that multiple method for analyzing the market trend are being used from investors. The Wyckoff method is one among those. The success rate can be increase to great extent if we apply the Wyckoff method after studying it properly. We know that the technical analyses are a way to predict the future of market. The investors Use the technical analyses and find out whether or not they should invest the money in market. The technical analyses give an idea about the market trend whether its bull or bear phase in market.

As Other technical analyses, the Wyckoff method may lead negatively. Sometime The Wyckoff theory sometime mislead the investor about the market trend and may cause of lose. So need is to study and practice the Wyckoff method many time. Only the you can successfully apply the Wyckoff method and can get full benefit of this method.

Cc:

@steemitblog
@fendit