Different Stages Of A Market Cycle

 Whatever market you are considering, they all go through the same phases. They rise, peak, descend, and then bottom out. The next market cycle starts when the previous one is over. The issue is that most traders and investors either overlook that markets are cyclical and fail to prepare for the end of the present market period. Another great difficulty is that it is virtually impossible to determine the top or bottom of a cycle, even if you acknowledge that they exist. To maximize your trading and investing profits in the cycle analysis stock market, you must have a strong understanding of cycles. Here are a market cycle's four main components and how to identify each.

Accumulation

When the adverse non linear indicators are at their depth and traders are rushing to sell their holdings, prices are often much lower when the accumulation period begins. The decline starts to lose steam as value investors and smart money purchase those valued securities.

Mark-Up Phase

The market has been stable up until this point and is starting to rise. The majority are joining the bandwagon early with the cycle analysis tools. This group includes technicians who know that the market's direction and sentiment have changed due to the higher lows and higher highs the market is making.

Distribution

As each buying order is promptly matched with a selling order during the distribution stage, there is an equal power distribution between buyers and sellers, and prices frequently range for a considerable amount of time. Prices start to improve when the bullish market attitude that pushed them higher during the mark-up stage starts to fade and turn neutral.

Downtrend

Investors begin to sell their positions and lock profits as cycle analysis becomes more adverse, adding to the existing selling pressure. A trend in the market is soon established as other market participants quickly follow, driving prices lower. Some market players who purchased at the height of the mark-up or distribution stage continue to hang onto their assets in the hope that prices will climb even if prices are beginning to form new lower lows and lower highs.

Bottom Line

Traders who thoroughly understand the various market cycle stages have a significant competitive advantage. A trader can profit by tracking the overall trend and selling their holdings after the uptrend shows symptoms of slowing down. The above listed are the phases of the marketing cycle you can consider.