Steemit Crypto Academy - Season 2-Week 8| The Wyckoff's Method| homework post for professor @fendit| by @roma078

As stated earlier in Professor @fendit's lecture, the Wyckoff method was developed by Richard Demille Wyckoff, a technical guru in the analysis of the stock market. This method was developed to assist traders to be able to make bigger investments and trades by understanding how the market trends move, and be able to correctly predict future trends. The Wyckoff method is a price cycle that basically have to do with a composite operator otherwise known as the "Composite Man".

The composite Man is an imaginary man, who sits at the top of everything else, and is able to manipulate/change how the prices in the market moves in predictable ways, such that once a trader is able to analyze how he works, the market will benefit him/her very much. On the contrary, the composite man is a great disadvantage to one who does not fully understands how he works in the price market. Mr Wyckoff, the composite man genius, made it clear to traders to seriously study and know more about how this method works if they indeed want to be successful forex traders. The composite man works in such a way to attract more people to invest in stocks, even though he has already planned and strategized how he intends to share his stocks. When one studies and practice more often, he/she can obtain the ability to read and analyze the movements in any chart, thus, identifying many techniques and opportunities from which they can make the best profits/gains. The nature in which prices move is in repeated patterns, that recur/repeat over and over again in the same manner.

The composite man comprises of 4 phases, which include:

1. The accumulation phase
2. The Uptrend/Markup phase
3. The distribution phase
4. the markdown/downtrend phase

These phases all indicate the movements of market prices in terms of the volume, supply, demand and the range of the market.

1. Accumulation phase:
   This phase is where the composite operator gathers assets/stock over a short range of volume. There is no significant increase in stock prices during this phase. and so the price stays steady and moves sideways. Once the stock is in strong hands and the composite man has accumulated substantial amount of assets, the cycle enters the next stage(ie, the markup phase).

2. Markup phase:
   This phase is where there is very little stock available, so there is very low supply compared to the demand from investors. As a result, it is obvious there will be increase in the price of stocks, just like in normal market products. As there's more reduction in supply, the demand becomes so high since more investors are attracted, hence price skyrockets up. During this increase in prices, a period may occur where there is a brief stall, where the prices moves sideways before continuing in an uptrend. This is commonly referred to as a re-accumulation period.

3. Distribution phase:
   This phase is where the stock has reached its peak price value. At this stage, more investors do not purchase it as much compared to earlier. therefore, the prices reach a stalemate, moving sideways. the rate of demand and supply is apparently constant and so prices don't go up as much. A lot of traders sell out their stock at this stage

4. Markdown phase:
   At this phase of the composite cycle, supply of assets becomes excessively more than demand by investors. also, most investors begin to sell their stocks. The increase in supply means decrease in prices. As the stocks continue to increase more than it's demand, the prices decrease exponentially.

These phases of the Wyckoff cycle are governed by three main laws:
a. Supply and Demand
B. Cause and Effect
c. Effort vs Result
To be able to get the tricks and techniques required in the Wyckoff method, the traderust be a good thinker, and dynamic in his trading options.

A. Supply and Demand:
Supply and demand of assets are one of the major determinants of their market prices. If there's more of the stock in the market than they are needed, it has lower prices as compared to when it's limited in supply with a high demand.

B. Cause and Effect:
As the name suggests, whatever happens in the prices of goods/assets leads to a change in how things move. Things that also happen also are the result of incidences that happened earlier. Accumulation and distribution are the two main causes that lead to marked responses in price values of stocks in the market. Accumulation (cause) leads to uptrends(effect) and Distribution (cause) leads to markdown (effect)

C. Effort vs Result:
Effort in a Wyckoff cycle is mainly determined by the volume and price ratio. When the volume of the stock order is high, it indicates a bigger effort, and when the volume is low, it implies a small effort. ie,

high volume = big effort
low volume = small effort

The above screenshot is a chart on BNBUSDT trade in a 4hr timeframe. As we can see, the various phases of the Wyckoff cycle has been labeled in the diagram as follows:

1. Accumulation: It is very clear from the diagram that the price of the asset does not increase significantly with time. Rather, it moves sideways in the chart, indicating typical representation of the Wyckoff accumulation phase. The volume is stable at this point.

2. Uptrend:It is clear from the example above that the asset has gone into an uptrend, with a slight re-accumulation period, after which the price increases massively again with time. At this point, more investors buy the assets, and there is increase in demand of the stock amidst low supply.

3. Distribution: The price of the asset becomes stable at this point, and begins to move sideways without any apparent increase in prices. At this stage, the supply and demand has been absorbed by the market and the composite man prepares for a markdown phase.

4.Downtrend: The price of the asset begins to fall because at this point, there is more supply than demand. As I marked in the diagram, the trend experiences a momentary stable period (ie, re-distribution phase) before further decrease in prices as time goes.

Conclusion:

The Wyckoff method is a really great method for traders and investors to help them master the art of technical analysis in forex trading.
I never really spent time to learn about this method as I thought it was not worth paying attention to. I really thank you Prof @fendit for this educative lecture. It really encouraged me to research more about it and doing so has increased my knowledge very much.

Thank you once again Professor. In my native language, I say "Ayekoo".