Richard Demille Wyckoff (1873–1934) was an early 20th-century pioneer in the technical approach to studying the stock market. He is considered one of the five titans of technical analysis, along with Dow, Gann, Elliott, and Merrill. Wyckoff was an avid student of the markets and an active ticker tape reader and trader. Wyckoff proposed a method to help understand price movements in stocks and the market as a whole: The Composite Man.
”…all the fluctuations in the market and in all the various stocks should be studied as if they were the result of one man’s operations. Let us call him the Composite Man, who, in theory, sits behind the scenes and manipulates the stocks to your disadvantage if you do not understand the game as he plays it; and to your great profit if you do understand it.” — Wyckoff
He advised traders to try to understand and play the market game as the Composite Man was a real entity played it with an all knowing formula.
- The Composite Man carefully plans, executes, and concludes his campaigns.
- The Composite Man attracts the public to buy a stock in which he has already accumulated a sizeable line of shares by making many transactions involving a large number of shares, in effect advertising his stock by creating the appearance of a broad market or a market as a whole.
- One must study charts with the purpose of judging the behavior of the stock and the motives of those large operators who dominate it.
- With study and practice, one can acquire the ability to interpret the motives behind the action that a chart portrays. Wyckoff and his associates believed that if one could understand the market behavior of the Composite Man, one could identify many trading and investment opportunities early enough to profit from them.
So lets over simplify Wyckoff Ideals:
- Buy at accumulation
2. Sell at Distribution
It’s pretty straightforward to put this into perspective and analyze what cycle most coins are in, just by looking at any old coin chart.
Wyckoff’s first rule tells traders and investors that the market and individual securities never behave in the same way twice. Rather, trends unfold through a broad array of similar price patterns that show infinite variations in size, detail, and extension, with each incarnation changing just enough from prior versions to surprise and confuse market participants. Cryptocurrency traders would call this a shapeshifting phenomenon that always stays one step ahead of profit seeking.
The second rule: Market relativity, tells us traders and investors that context is everything in the financial markets. Thus, the only way to evaluate today’s price action is to compare it to what happened yesterday, last week, last month, and last year. Analyzing a single day’s price action in a vacuum will elicit incorrect conclusions.
So for now lets enjoy the re-accumulation phase boys and girls.