Market movements are like an ongoing, endless story. What we should understand about the market—its charts and incalculable numbers and indicators—is that they are mind-made effects. For every action and movement, there is a vast number of participants with different intentions and reasons for doing what they did or refrained from doing. This is why behavioral finance has become an alternative to traditional, efficient market theories. It’s also why traders need to master psychology. Predicting outcomes using statistics and fundamental facts is no longer enough to succeed in the market.
In studying market participants' behaviors, two focal ideas emerge: one focuses on mass behavior and herd instincts, while the other examines the intentions of "smart money." Each approach has its pros and cons, but there’s a third alternative rooted in Wall Street’s history—Richard Wyckoff’s concept of the "Composite Man."
In theory, the Composite Man, or C.O., is a figure who sits behind the scenes, manipulating asset prices to the public’s disadvantage. The C.O. executes campaigns by attracting a public following and manipulating the market to liquidate margin traders. In reality, the C.O. isn’t a single person but represents the combined operations of insiders, bankers, pools, large operators, brokers, floor traders, and the public—as if all market transactions were orchestrated by one mind. This idea bridges both behavioral finance perspectives, combining smart money and public behavior into a single entity.
Insiders
Operators
The C.O. constantly expresses his intentions through his actions and methods—whether through the urgency or leisureliness of his buying or selling, the volume he deals in, or the breadth of price swings, especially in market-leading assets. If the C.O. holds a long position, he aims to advance prices whenever possible to benefit his entire position. He is like a general advancing into enemy territory: his allies are the bulls, and his enemies are all types of bears. And exact converse scenario happens when he holds a short position.
This large manipulator, besides being a trader, must possess an active imagination, envisioning broad strategies. He conceives complex plans, mentally executes them, believes in this seeming mirage, and has the courage to gamble on his vision. The C.O. relies unconsciously on his judgment, and his knowledge is both open and invaluable to him. Emotions like pity, generosity, or mercy—lovable human frailties—must be absent until his business concludes, as they weaken his work.
Brokers tackle three problems: making money for clients, studying statistics and judging values, and learning about the operations of major market players. As the saying goes, “If you expect to succeed, you must give an honest return for the other man’s dollar.”
Operators are the biggest "powers" running the market. They live and breathe with the market, focusing on liquidity zones as the most active traders. They can influence market direction to some extent and public sentiment to a large degree. The largest operators act as a stabilizing flywheel, especially during critical times, balancing a market that would otherwise experience erratic swings due to public behavior.
Basically, there are two types of operators: hedgers, who trade to reduce risk exposure, and speculative traders, who take on risk when opening positions. They make inquiries before trading, ignore nothing, and never fight market verdicts. Their attitude is impartial, whether the market moves up or down—they swim with the tide.
Bankers
In contrast to operators, Bankers spend little time studying the market, preoccupied with their broader affairs. Big bankers and operators wouldn’t sell heavily unless anticipating a significant downturn. They leverage their connections with newspapers and publicity controllers to place bets on news. When they want to dampen market excitement during a bullish campaign, they let it ride just enough. Their purchases often signal improvement, as they typically expect pronounced changes soon. When lending to struggling companies, bankers secure control via voting trusts.
Bankers judge the market by its own actions rather than soliciting opinions. Sometimes they operate in harmony or gauge each other’s attitudes through their assets’ movements. Though many assume bankers have superior information, this isn’t always true.
Institutions
Large institutions dominate 90% of the market, investing heavily in tools and skilled personnel. Retail traders play a minimal role in most trades, and over time, many institutions fall victim to the market. Their edge lies in the speed of processing and execution via powerful computers.
Pools
Without insider manipulation, pools seize the opportunity to operate. Many markets move stem from groups pooling resources and swinging large quantities. Pools and syndicates significantly drive fluctuations and vary in size and style—from holding a few thousand shares to hundreds of thousands. At least one pool operates in every asset, often several. Typically managed by one person or a small group, the pool manager advises when to liquidate, especially when the price is overvalued or otherwise.
A "bellyful pool," orchestrated by manipulators, can crash securities overnight. However, participation in a pool doesn’t guarantee profits—even insider-led pools misjudge and incur losses. Some pools work for years to control an asset without success. The notion that collective judgment surpasses individual insight is a delusion; one knowledgeable person’s undiluted judgment often outshines mixed opinions. Moreover, big players may use pools to trap each other.
Weakness
Wall Street often says, “Inside information will break anyone.” Insiders can be the worst judges of their assets because proximity blinds them to weaknesses. Confidence in inside knowledge complicates unbiased opinions. Even the most powerful operators don’t fully know the future. No matter a firm’s capital or resources, failure looms—from bad management, thin margins, unsound promotions, partner speculation, or employee defalcations. No one monopolizes market knowledge or succeeds every time. Large operators make the same mistakes as small traders, just with bigger stakes.
Not all moves are detectable or manipulator-driven. They can’t influence prices always. The market sometimes outgrows them—too many assets, operators, and traders using identical charts create imbalanced supply and demand. After a strategy is repeated, others recognize and mimic it. It’s too important to remember that many price movements reflect individual or pool agendas, not intrinsic value. As public participation grows, manipulator power fades. Small operators can move quickly, while large ones must wait for or create favorable conditions—sometimes unsuccessfully.
Outsider
Unless you’re a trained, experienced insider or investor, you are part of the unorganized public, led and misled by mass greed and fear. You should ask yourself, if experts can’t agree, what chance do retail traders have? Trading and investing are too complex for the average person at home—everything works against them. And by the time the public catches on, prices have already soared or crashed.
Insiders, pools, large operators, floor traders, and hired manipulators oppose the public. The big fish eat the little ones. If insiders traded like outsiders, they’d soon join them. Large operators rely on the public as a buffer; without them, success would elude them. The market blinds people to the possibilities of losses and profits, with most outsiders perpetually bullish, chasing “easy money” and “get-rich-quick” schemes
So, the market keeps telling its endless story, and behind every twist, every swing, there he sits—the Composite Man. Not a real soul, but the shadow of all who play the game: the insiders with their secrets, the operators hunting liquidity, the pools swinging fortunes, and the public chasing dreams of easy gold. He laughs at our charts and numbers, for he knows they’re just echoes of minds at war. To win, you must see through his tricks, think like the master who isn’t there, and feel the pulse of greed and fear he stirs. In this wild tale, the Composite Man is the only one you should know—because he’s everyone, and no one, all at once.
I appreciate you reading this, and your take means a lot. Feel free to drop whatever you’re seeing out there.