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.
This article is cross published from read.cash by yours truly, :