Phases of the market

Wyckoff explained the markets moving in four different phases

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  • Accumulation
  • Markup
  • Distribution
  • Markdown

No matter what market you are trading, if it’s tradeable it will move in the four phases listed above. We will explain each phase in detail and it is of vital importance that you identify in what phase price is, and what the background was before entering any new trade.

Phases can occur on any timeframe and last for very long periods of time, there are no rules on how long the phases will last.

Accumulation

Click to enlarge picture

The accumulation phase is the phase where market makers and smart money starts to accumulate a tradeable asset. This chart shows one accumulation phase of USDJPY on a daily graph.

Why does accumulation occur?

When an asset reaches lower prices it will attract buyers. Professionals are looking to buy cheap and to sell high, this is nothing but pure logic. However, any asset, wether it is stocks or currencies, are limited. There is not an infinite supply of that particular asset available. So let’s say when something cost 100 $ / share and drops down to 90$ / share there is only a certain amounts of shares availbale at that price. So, the professionals will look to buy ALL shares availbale at that price, and leave NOTHING for you or me. However, they cannot place an order for all the shares at that price at the same time, this will lead into a fraction of their order being filled before price go up, as demand has suddenly increased. Instead, they place their buy orders under the radar, smaller order spread across time so it won’t affect price against their own interests. That is how an accumulation phase is created. Once all available shares at that price are bought and there is no one left willing to sell at the lower prices, a markup phase can begin.