Blockchain and Cryptocurrency Basic - About the Wyckoff's "Composite Man" Method

When it comes to technical analysis, there are a lot of strategies and methods that have been developed to help traders capitalize on the market and make more profits. The Composite Man is very popular in the Wyckoff method. The composite man was created by Wyckoff as an imaginary identity of the market. In the theory, Wyckoff proposed that traders or investors should pay attention and learn about the market, in this case, cryptocurrency market as if it was a single entity that is controlling it as this would be much easier for them to follow the trends in the cryptocurrency market.

The composite man represents the big investors who are also known as market makers because of the huge influence in the cryptocurrency market. The ultimate aim is to ensure that these market makers can buy low and sell high in order to accumulate more profit. When it comes to the composite man, there are steps that are used to influence prices movement in the cryptocurrency market which is also known as market cycle. When analyzing cryptocurrency or when performing technical analysis on any cryptocurrency, this cycle becomes very beneficial. According to Wyckoff, there are four main phases when it comes to market cycle which are; accumulation, uptrend, distribution and downtrend.

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Accumulation

The accumulation phase is basically the phase where there is more demand. In this phase, the big investors or the composite man continues to buy and accumulate the cryptocurrency asset before most investors. Sideways movements of the assets is mostly associated with this phase as in the accumulation phase, the purchases are gradually done so as to ensure that the price does not change significantly.

Uptrend

The uptrend phase is basically where the selling pressure is greatly reduced and the market begins to rise up because the composite man is holding so much assets. When this happens, it is normal for more investors to start entering the market, thereby increasing the demand. It is important to know that in the uptrend phase, there may be experiences of multiple accumulations which means that the bigger trends pauses, corrects and continues to move upwards again. This phase attracts more investors as everyone wants to join and take advantage of the uptrend movement which causes the demand to increase more than the supply.

Distribution

The distribution phase is basically where the composite man begins to take profit by selling some portions of his holdings to new buyers who are entering the market. At this phase, the price is on the high side which makes it profitable for the composite man. Sideways movements is associated with the distribution phase. In the distribution phase where the composite man begins to take profit by selling some portion of his holdings, the demand for the asset begins to reduce until it is depleted causing the price to go downwards.

Downtrend

The downtrend phase is basically the opposite of the uptrend phase as this is the phase that comes after the distribution phase. The composite man is taking profit and selling his holdings, the demand continues to reduce until it is depleted thereby causing the market to move in a downtrend direction as the demand decreases lower than the supply. Much like the uptrend phase, there might be multiple distributions which means that the market might pause, corrects and begins to move downwards again. In this phase, some buyers might fall into the trap of the distributions, hoping for the market to move upwards. However, the market continues to move in the downtrend or bearish direction.