The 4 phases that make up a market cycle.?

The 4 stages of a market cycle on a long-term chart are the accumulation, uptrend, distribution, and downtrend phases.

All markets tend to go through these four phases as a complete cycle unfolds, from lows to highs and then back to lows.

The Accumulation Phase, the 1st stage of a market cycle

Accumulation occurs after the market finds a bottom and value investors and dip buyers start buying after the bottom is reached, both believing that the worst is over.

Value investors favor purchases when they believe that the price of securities is lower than their intrinsic value: the fundamental value of the assets in question.

Traders buy the dip based on their oversold technical analysis on the chart.

From a “psychological” point of view, it is hope that prevails during this phase.

The Uptrend Phase, the second stage

The charts start making higher highs and lows during the upswing. This happens after the market hit a low that held and then created a definite range over time before breaking through resistance and reversing the trend.

It is during this phase that growth investors are interested in buying companies that could become the new market leaders based on their earnings and potential.

It is also during this phase that momentum traders buy technical breakouts and trend traders start trading long contracts.

Greed has become the dominant emotion during this phase.

The Distribution Phase, the 3rd stage of a market cycle

The distribution phase begins when the sellers take their profits and the charts fail to reach new higher highs

We see it graphically via ranges; the price moves sideways. Profit taking dominates this part of the cycle as the charts reach their highs and bearish chart patterns form like a double top for example.

Downtrend phase

A downtrend phase occurs when price makes lower highs and lows due to too much selling pressure to be absorbed by buying.

This is the phase where Stop Losses are triggered, causing a chain reaction and lower and lower prices.

Rebounds are never enough and only constitute resale opportunities for pros and institutions but also for investors who have enough perspective.

It is important to know in which phase of the market you are trading to understand the best strategy to use; it is even strictly essential in order to maintain your profits throughout the year.

ULTRA basic trading strategies

Buy support and sell short-term resistance in a range during the accumulation and distribution phases.

Buy pullbacks in an uptrend.

Short the downtrend resistances .

If you want to go further on understanding market cycles, I invite you to deepen Wyckoff now!