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# **Introduction**
The wyckoff theory is a technical analysis that was developed by a famous stock trader and analyst who was one of the 5 titan of technical analysis,Richard Demille wyckoff in early 19th century.
The wyckoff method was basically meant for the stock market cause Richard was a stock trader but this method can be applied to all financial markets and cryptocurrencies market included.
Wyckoff Method in cryptocurrency is a technical analysis approach to controlling the cryptocurrency markets by examining the price mechanism that is the relationship between the forces of demand and supply. This method helps traders to major market movements.
Richard wyckoff did alot of extensive research which lead to the development of different theories and techniques and the main part of the theories are : Composite men, the three fundamental laws, approaches to the market.
# **Composite men**
Composite Men also known as Composite Operator. Composite men act as an imaginary identity in the market and it represents the biggest players who have great influence and ability to manipulate financial or crypto assets to their own interest, this players are like the wealthy people, big corporation, etc. It is very important to understand the way the composite man is playing the market as he only plays the market to favor his interest only so playing according to composite man will help retail traders to have a favorable market.
Wyckoff proposed that investors and traders should view the market as if it was controlled a single person. This would make it easier for them to flow with the market trends as the composite man is very predictable so knowing when the price will move is very easy if this principle is followed.
There are steps the composite man use to influence prices move in the financial or crypto market and this is known as price or market cycle and this cycle is still useful in analysing crypto and financial asset. There are four main phases of market cycle according to wyckof and they are:
**1. Accumulation phase**
**2. Uptrend/markup phase**
**3. Distribution phase**
**4. Downtrend/markdown phase**
# **Accumulation phase**
This is the first step in the wyckoff market cycle, the composite man gathers asset before other investors accumulate theirs and they buy this asset at a very low price than others.
The accumulation phase is done gradually to avoid price from rising significantly .
# **Uptrend phase**
Also known as markup is the next stage after the accumulation phase, When the Composite Man is in control of enough assets and there is little left for supply, he starts pushing the market price up and this will increase demand as other investors will like to buy the assets but the supply is only limited to the composite man, this will make demand much more higher than supply and they price will rise and they bullish trend will appear on the assets charts.
# **Distribution phase**
Distribution base is the third phase in the wyckoff market cycle, The composite man is already in position of the asset and demand is very high why supply is low so there is an increase in price, He start distributing his holdings by selling his asset to those who are just entering the market. He sells the market at high price and makes alot of profit from doing so. During this movement, the chart slowly begins to show a bearish trend.
# **Downtrend phase**
This is the last phase of the wyckoff market cycle, when the composite man sells most of his asset to meet the demands of the people, he pushes the price down again by making supply more than demands, this makes the price fall and other investors will be fixed forced to sell their asset. Composite man might choose to re accumulate this asset again by buying it from other investors and the cycle continues this way.
The chart in bearish in downtrend phase and it is also referred to as markdown phase.
# **The three fundamental laws of wyckof**
Richard wyckof gave three fundamental laws which are the cause for the market cycle and they are:
**1. The law of demand and supply**
**2. The law of cause and effects**
**3. The law of efforts and result**
# **The law of demand and supply**
The first law of wyckof laws is the law of demand and supply, The law states that price increases when demand is greater than supply, and price decreases when supply is more than the demand. What this means is that when there is excess demand and there are more trader that are willing to buy than sell their asset, this will increase the price of the asset more due to the scarcity. But when there is excess supply and traders are willing to sell but there is no buyer or demand is low, this will lead to reduction in the prices of the asset as there is no scarcity of that asset. When the demands equals the supply, there is equilibrium and there is little or no change in the price of the asset.
Investors who use the Wyckoff Method compare price and volume to see thr relationship between supply and demand and this gives them ability to foresight next market movements.
# **The law of cause and effect**
This is the second fundamental law of wyckof laws, this law states every cause in the market leads to an event, for example, we have 4 market cycle which is accumulation, uptrend, distribution and downtrend. All this phase came as result of a trend, the accumulation phase was the cause of uptrend which is an effect and the distribution phase Is the cause of downtrend (effect). Traders use this law to set price target by analyzing the extent of a price trend breaking out from trading range and there is a technique called point and figure chart, Point and Figure chart can be used to calculate the cause and project the level of the effect.
# **The law of efforts and result**
This is the last of of wyckof fundamental laws, the law states that the change in the price of an asset is a result of an effort, in this law, the effort is trading volume while the result is the price action maybe reduction or increase. So when there is harmony between the effort and the result, that means there will be a continuation of an asset trend while if there is divergence between the effort and result, there is likely to be a change in market trend. So this law is more like a warning signal to traders for a potential change in direction of a market trend.
**Question 2**
Binance coin is a popular crypto traders, it is the native cryptocurrency of the binance exchange. The image below is the 90 days time frame chart of the binance coin.
The chart above is a bullish trend as we can see how the price as been increasing from less than hundred dollar to seven hundred dollars.
The accumulation period of this asset chart was when it was at two hundred dollars, the composite men begins to hold the coin and when other investors started notice the increase in price of this assest, the deman demand started increasing at six hundred dollars, more people are interested in buy but the supply is limited and the price is now high, the composite men then start distributing their coin that is selling them when at $650, due to the excess supply of the binance coin, the price begins to fall and the downtrend phase sets in making the chart bearish and a unit of binance coin is sold at $359.
Base on this image we can see all the market cycle how the composite men bought it cheap and sold it at high level and also the law of supply and demand from the fundamental law of wyckof is very obvious here, when there was excess demand, the price was high and binance coin was sold at $650 but when the supply started and there was excess than deman the price reduces and to $500 and then downward. The law of effort and result is also obvious as the high influx of binance coin in the market lead to the reduction in demand.
Re-accumlation is still possible now as composite Operator would have bought more binance coin in reserve and patiently wait for it to rise and then distribute it again so as to make high profit from the market again.
Thank you @fendit for the lesson and @steemcurator02
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