Market Cycles & Phases
Cycles are prevalent in all aspects of life; they range from the very short-term, like the life cycle of a insect, some which can live a few days, to the life cycle of a planet, which takes billions of years.
All financial markets go through the same phases and are cyclical. They rise, top out, drop, and then bottom out. When one market cycle is finished, another begins.
The problem is that most investors and traders either fail to recognize that markets are cyclical or forget to expect the end of the current market phase.
There are 4 key phases in a Market Cycle:
The heavy buying phase before the uptrend begins.
2. Mark Up/ Re accumulation
Mark Up is the uptrend, Re accumulation phases are sideways pauses in the uptrend where more buying occurs before continuation of trend.
The heavy selling phase before the downtrend begins.
4. Mark Down / Redistribution
Mark Down is the downtrend, Re distrubution phases are sideways pauses in the downtrend where more selling occurs before continuation of trend.
The dictionary definition of trend: *a general development or change in a situation or in the way that people are behaving. In financial markets the direction the price of a asset is moving is referred to as the trend.
Markets are made up of several different kinds of trends, and it is the recognition of these trends that will largely determine the success or failure of your long and short-term investing.
There are 3 key trends in Markets:
1. Bullish (upwards, buyers in control) (higher lows, higher highs (HL, HH)
The Mark Up phase is an uptrend or .
2. Bearish (downwards, sellers in control) (lower highs, lower lows (LH, LL)
The Mark Down phase is an downtrend or .
3. Consolidation /Sideways (sideways, direction & control undecided temporarily)
Re accumulation & Re distrubution phases are consolidation phases or "pauses" in the market before continuation of trend or reversal.
It is essential to understand Market Cycles, Phases & Trends, which are important behavioral characteristics of how price develops over time. By fully understanding these concepts and how one can identify them, a trader or investor can generate more opportunities, secure a longer term plan reducing stress levels, and potentially maximize profits.
Once a asset has already moved on from the Accumulation phase the next best buying opportunity is the Reaccumulation phase (marked in yellow) where price usually starts to in a sideways movement after a strong upwards movement. The Reaccumulation phase is where the price is usually "held down" by large transactions, while buyers fill positions, eventually the price can no longer be held down and we see the continuation of the Mark Up.
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