During this blood bath in all pairs of crypto any trader must notice dow theory chart immediately after seeing this chart of ETH , which states that there are three phases to every primary trend – the accumulation phase (distribution phase), the public participation phase and a panic phase (excess phase).
Let us now take a look at each of the three phases as they apply to both bull and bear markets.
-Primary Upward Trend (Bull Market)
1-THE ACCUMULATION PHASE
The first stage of a bull market is referred to as the accumulation phase, which is the start of the upward trend.
The accumulation phase typically comes when everything is seemingly at its worst. But this is also the time when the price of the market is at its most attractive level because by this point most of the bad news is priced into the market, thereby limiting downside risk and offering attractive valuations.
2-PUBLIC PARTICIPATION PHASE
During this phase, negative sentiment starts to dissipate as business conditions - marked by growth and strong economic data - improve. As the good news starts to permeate the market, more and more investors move back in, sending prices higher.
3-The Excess Phase
The last stage in the upward trend, the excess phase, is the one in which the smart money starts to scale back its positions, selling them off to those now entering the market. At this point, the market is marked by, as Alan Greenspan might say, "irrational exuberance". The perception is that everything is running great and that only good things lie ahead.
Primary Downward Trend (Bear Market)
1- THE DISTRIBUTION PHASE
In this phase, overall sentiment continues to be optimistic, with expectations of higher market levels. It is also the phase in which there is continued buying by the last of the investors in the market, especially those who missed the big move but are hoping for a similar one in the near future.
2- PUBLIC PARTICIPATION PHASE
During this phase it is clear that the business conditions in the market are getting worse and the sentiment is becoming more negative as time goes on. The market continues to discount the worsening conditions as selling increases and buying dries up.
3-THE PANIC PHASE CURRENT PHASE
The last phase of the primary downward market tends to be filled with market panic and can lead to very large sell-offs in a very short period of time. In the panic phase, the market is wrought up with negative sentiment, including weak outlooks on companies, the economy and the overall market.
During this phase you will see many investors selling off in panic. Usually these participants are the ones that just entered the market during the excess phase of the previous run-up.
But just when things start to look their worst is when the accumulation phase of a primary upward trend will begin and the cycle repeats itself.