An Overview of the Wyckoff Method: Part 5 - The "Composite Man"


An in depth explanation of the Wyckoff composite man

In this final edition of An Overview of the Wyckoff Method, we will discuss the most important fundamental concept, which Wyckoff based all his teachings and studies around. This concept is known as the “Composite Man.” If you would like to look back at any of the other topics we have discussed in this series, feel free to check out the links below!

An Overview of the Wyckoff Method: Part 1

An Overview of the Wyckoff Method: Part 2 – Accumulation

An Overview of the Wyckoff Method: Part 3 – Distribution

An Overview of the Wyckoff Method: Part 4 - Reaccumulation and Redistribution

Wyckoff’s composite man

“All of the functions in the market and in of 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.” – Richard D. Wyckoff.

The “Composite Man” or “Composite Operator” is a heretic device Wyckoff created to help understand the movements of individual stocks, as well as the entire market, on a large scale. Wyckoff. Advised traders to approach the market, as if they were the “Composite Man” themselves. The “Composite Man” – and behaving like him – Is similar to the “Best way to catch a fish, is to think like a fish; rather than a fishermen” concept. Based on a lifetime of observing the impact of large operators on market conditions, he taught his pupils to understand:

  • The “Composite Man” carefully executes his plans: He is looking at the big picture when he executes and concludes his campaigns.
  • The “Composite Man” only attracts the public to purchase assets that he already owns, in large quantity. He does this by making a lot of large transactions, effectively advertising the palpability of his asset by creating the appearance of a broad market.
  • Individual assets need to be studied to judge, not only the behavior of the asset itself, but the behavior and motives of the large operators who dominate it, with controlling shares.
  • With enough study and practice, one can develop the ability look at a chart and identify the motives of the “Composite Man.”
  • If you can understand the motives of the “Composite Man,” you can identify all kinds of investment opportunities, early enough to be able to profit off of them, by you, behaving as if you are the “Composite Man.”

Let us look at some examples of what Wyckoff would like us to understand, from some of the concepts we have discussed up until this point. Phase C of the Wyckoff Distribution chart is likely the point where market manipulation by the “Composite Operators” appears most evident.

wyckoff 3.png

“Phase C -- This phase may reveal itself with an Upthrust (UT) or an Upthrust After Distribution (UTAD). It is a price move above the trading range resistance, which quickly reverses and closes within the trading range. It is also a bull-trap, meaning it appears to indicate the redemption of an uptrend, but in actuality is intended to "fake out" unconfirmed break-out traders. Upthrust (UT) and Upthrust After Distribution (UTAD) allow large interests the oppertunity to mislead the public about the future direction of the trend, in order to sell additional assets at elevated prices to traders and investors before the markdown begins.” – An Overview of the Wyckoff Method: Part 3 – Distribution

Furthermore, Reaccumulation and Redistribution, which we discussed in An Overview of the Wyckoff Method: Part 4 are direct examples of both “Bear traps” and “Bull Traps.” These are essentially events created by the “Composite Man” that are designed to make the market appear as if it is going through a trend reversal. When the market is moving upwards, a “Bear Trap” is placed, and the market is made to look – by the “Composite Man” – as if it will start moving in a downwards direction. Conversely, when the market is moving in a downwards direction a “Bull Trap” is placed, and the market is made to look as if it will start recovering in an upwards direction.

In Conclusion

The Wyckoff Method is not the only methodology which can be applied to the markets, however it is one of the most fundamental and effective approaches to technical analysis. The Wyckoff Method has has consistently withstood the tests of time, and is still used widely amongst skilled traders.

The Wyckoff Method is fantastic first step for anyone who is studying technical analysis! We hope you enjoyed this series!

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