The Four Phases of Market Cycles
Markets move in predictable cycles that repeat throughout history. Understanding these phases can help you make better investment decisions.
1. Accumulation Phase
This phase occurs after the market has bottomed and early investors begin buying. Sentiment is still negative, but smart money starts accumulating positions.
2. Markup Phase
The market begins to rise as more investors recognize the opportunity. This is typically the longest phase with the most significant gains.
3. Distribution Phase
Early investors begin selling to latecomers. Volume increases but prices struggle to make new highs.
4. Markdown Phase
Selling accelerates as sentiment turns negative. Prices decline until the cycle begins again.