A Glimpse into the Wyckoff Method

As I stay longer and longer in the crypto realm I often encounter things and stuff that I do not have any idea about. I always read about a term that I see for the first time and I often face a concept that I would have never seen in a million years. As I dig dipper into the crust of the cryptocurrency and trading world, the discoveries seemed to be more and more confusing and a whole lot complicated. Just like today, as the price of BTC/BCH continues to stay low, I read some articles saying that this behavior is expected and is good.

Some of them say that this is an indication that it is still following the trends that it should have been following from the start so they are saying that it's not the time to panic, it's the time to collect more, and more of your holdings if possible.

Wyckoff accumulation, Wyckoff method, Wyckoff way, Wyckoff redistribution, Wyckoff pattern, and I was like what on Earth is a Wyckoff?

Richard Wyckoff

So apparently, the "Wyckoff" I encountered several times on several occasions is a guy. He was a highly esteemed figure in financial and trading market alongside the names of Charles Dow, Jesse Livermore and Ralph Elliot. But to tell you honestly, I don't even know who those guys are. The only name there that rang a bell was Charles Dow. Because I am familiar with that "Dow" always popping up on a stock market feed.

He had written about the financial market back in his days and he was the one who devised the so-called Wyckoff pattern people know today.

Wyckoff Pattern

Basically Wyckoff pattern is an observable trend in the financial markets ecosystem. But unlike those candlestick patterns that stretches from one to three or several more patterns, the Wyckoff pattern looks at the financial state of an asset in a bigger and broader picture.

Wyckoff proposed that to understand the stock market, it is helpful to imagine a single entity controlling it. He referred to that entity as composite man (or composite operators) . This imaginary single entity is comprised of the key or biggest players in the stock market. They may be those overwhelmingly rich dudes and/or institutional investors. Definitely, whales are included in this entity.

This composite man has a total control of the market in Wyckoff's model. He stated that every move the composite man makes is in service of his own interest to buy low and sell high.

With the existence of the composite man, he imagined a simple cycle of the stock market. The cycle is then divided into 4 main parts : accumulation, uptrend, distribution and downtrend.

Accumulation

This early phase of the pattern indicates that the composite man is gathering shares for his holdings. This phase stretches over a period of time because the composite man paces his purchases gradually so as not to drive up the price of the asset drastically.

Uptrend

When the composite man has collected enough shares of the market he will have enough power to drive up the interest of the general public and in effect driving up the price of the asset. The demand will be more than the supply so the obvious uptrend will entice investors to get onboard and join the ride through the moon.

Distribution

The price is high, the share of the composite man is high and it 's time to liquidate some of the assets. The composite man now begins selling his holdings to investors that came late in the stage at a high profit.

Downtrend

When the composite man has sold enough of his shares he will then try to drive the market down so that a downtrend may begin and the price of the asset will go down, down and down. I imagine that in this stage of the cycle, a lot of people will lose much of their money specially if they are desperate enough to liquidate even the losing assets.

Some time in the future, the bearish trend will end thus beginning a new accumulation phase of the cycle.

A lot of technical details are involved in the explanation of the Wyckoff pattern and I may try to dive into them in the future, but for now, this is what I have gathered with regards to the Wyckoff pattern.

In simpler terms, I think that the Wyckoff pattern is saying that the market will always move in the same manner but the duration and the timeframe may be different. You may be waiting for days, you may be waiting for months, but the same phases will always happen again and again.

Of course the "price" value may not always drop down to the beginning but it is important to look at the bigger picture rather than specific points in time of the market's life cycle.

And again, as always, trading and investments will always be a risky business, especially in cryptocurrency. As part of the general public, we will never be sure how to market would react or move within a certain period. But patterns like this one gives us some comfort in knowing that if the trend and pattern holds up, there will be much profit to earn.

Hey there!!!

Thank you for stumbling into this article of mine. I am just studying bit by bit again, and I thought I'd share some of my thoughts regarding this Wyckoff subject. What about you? Any points, thoughts or just comment regarding this? I'd love to hear from you. Kindly drop by on the comment section below.

I appreciate your time here and as always ...

Cheers!!!