10. Wyckoff/SMI provide us with just such a "fictional" SUPER TRADER: THE COMPOSITE MAN:
Composite Man
In studying, understanding, and interpreting market action, we consider all market action as a manufactured operation in which the buying and/or selling is sufficiently centered and coming from interests better informed than the generally untrained individual investor/speculator. The many large interests which do have an effect on the market place (trust companies, banks, mutual funds, investment trusts, investment companies, hedge funds, specialists, position brokers, etc.) are best thought of as the "Composite Man."
This Composite Man causes the market to act and react. Or, what actually happened is the market responds to the ageless, natural Law of Supply and Demand. The Composite Man and the effects of the Law of Supply and Demand are relay synonymous. It is the result of the motives, objectives, hopes, and fears of all the buyers and sellers whose actions produce the net effect upon the market.
Other terms which may be thought to be synonymous with the Composite Man would be the "Market", the "Sponsor", the "Operator", or "They". These terms are used interchangeably throughout the text. The selection of the terms is determined by what is most meaningful to the student. It should be your objective to think of the Composite Man as the primary force in the marketplace. Thinking of him in this light should enhance your analysis of the action resulting from the dominant groups operating within individual stocks and their total effect within the general market place.
11. Richard D. Wyckoff based the COMPOSITE MAN, and based his own trading philosophy, upon his observations and intimate understanding of such famous old-time professionals as James R. Keene, Russell Sage, Edward H. Harriman, and Jesse Livermore.
12. Indeed, Edwin Lefevre's Reminiscences of a Stock Operator, which is based upon Jesse Livermore, is an excellent model of the COMPOSITE MAN or COMPOSITE OPERATOR.
13. Dubin examines how fictions enable decision makers to more adequately cope with the unknown.
Organization fictions are those fictions that are necessary in order that action within the formal organization may proceed.
14. The concept of the COMPOSITE OPERATOR serves a function similar to the role or organization fictions.
15. Playing the role of the COMPOSITE OPERATOR enables the market decision-maker to escape his/her "egocentric predicament".
There is no more serious error that a marketer can make than to allow himself to be caught in the "egocentric predicament". In the realm of philosophy, from which the expression is borrowed, the egocentric predicament simply describes the basic situation in which each one of us finds himself, namely, that he has to look at the world through his own eyes. In marketing, the implication of the phrase is that any seller who succumbs to the natural temptation to look at his problems solely from his own viewpoint and who does not make a conscious effort to overcome the natural limitations of his own outlook will indeed find himself in a predicament. Look at every problem from the standpoint of the COMPOSITE OPERATOR!
16. Overcoming the "egocentric predicament" by playing the role of the COMPOSITE OPERATOR automatically neutralizes the emotions by placing one is a dissociated position. Tharp notes that:
One of the biggest secrets of trading success is to remain cool, detached, and unemotional. Most traders who obtain and maintain that detachment do so by being dissociated. In other words, instead of actually experiencing the ups and downs of the market, they watch themselves having that experience. When Dick, the trader introduced in the opening story, became anxious, he moved to a dissociated position to observe himself. Other traders who undergo extreme emotional ups and downs as the market fluctuates go through those emotional swings because they remain associated. Simple dissociation is an effective way to neutralize your emotions.
17. Playing the role of the COMPOSITE OPERATOR forces us to reframe our perceptions. As Robbins explains, "…The meaning of any experience depends upon the frame we put around it. If you change the frame, the context, the meaning changes instantly. There are ways to see our biggest problems as our greatest opportunities -- if only we can step out of our trained patterns…If we change our frame of reference by looking at the same situation from a different point of view, we can change the way we respond in life. We can change our representation or perception about anything and in a moment change our states and behaviors. This is what reframing is all about."
18. By assuming the role of the COMPOSITE OPERATOR we can create dissociation and cause reframing. We will see market events differently; we will talk to ourselves about those events differently and in a different tone of voice, and we will feel differently about those events. As a consequence, our behaviors will more appropriately move us toward our objectives.
19. Wyckoff/SMI implore us to follow in the footsteps of the COMPOSITE OPERATOR -- to think like him and to act like him:
a. Like individuals, stocks have certain characteristics with which one becomes more and more familiar as he studies intensively their past and present movements. The market is made by the minds of men, and all the fluctuations in the market and in 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 plays the stock to his advantage. It's to your disadvantage if you do not understand the game as he plays it; and to your advantage if you do understand it.
Not all of the Composite Man's moves can be detected. Not all of the moves are made by the Composite Man. In fact, it does not matter to the tape reader or the chart reader whether the moves are real or artificial, that is, the result of actual buying and selling by the public and long term investors or buying and selling by large traders. Most of the important trades in the market are prepared, executed, and concluded. It is our business to show you how a large number of these trading and investment opportunities may be spotted in time to take advantage of them.
b. The Composite Man carefully plans, executes, and concludes his campaigns.
c. A 'broad market' is created by the Composite Man advertising his stock on the ticker tape.
d. Study charts with the purpose of judging the behavior of the stock and the motives of those who dominate it.
e. To study charts, look for the motives behind the action which the chart portrays.
f. But, the market behaves naturally in this very manner. And, if you learn to understand this market behavior of a so-called Composite Man, you can learn to make judgements, then conclusions, which should have a positive effect in your stock market operations.
20. To attain the perspective of the COMPOSITE OPERATOR, we should ask ourselves such basic questions as: "What is the motive of the COMPOSITE OPERATOR?" and "What would I do if I were the COMPOSITE OPERATOR?"
21. In addition to the basic two queries about the COMPOSITE OPERATOR, we can add such complementary questions as: "What is it that the COMPOSITE OPERATOR is attempting to prepare or carry out or conclude?"; "What is the COMPOSITE OPERATOR attempting to do to the public and for what purpose?" As you gain understanding through practice with the role of the COMPOSITE OPERATOR, you'll want to add your own questions to the list.
REFERENCES
1. Brown, England and Matthews, Problems in Marketing
2. Robert Dubin, Human Relations in Administration
3. Edwin Lefevre, Reminiscences of a Stock Operator
5. Van K. Tharp, How to Develop Discipline to Become a More Successful Investor
6. Richard D. Wckoff, Wall Street Ventures and Adventures Through Forty Years
7. Wyckoff/SMI, The Richard D. Wyckoff Course in Stock Market Science and Technique