Richard Wyckoff Market Cycle Phases is one thing which has helped me distinguish different phases in a market. Sometimes markets are trending, some times they are trapped in a range and some times they are just pausing before they resume original trend. With Richard Wyckoff Market Cycle Phases I can now prepare for the change in phases of markets. And these changes have a definite pattern.
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What are the Different Richard Wyckoff Market Cycle Phases?
The adjacent chart shows different phases of a market cycle. These phases show which party Buyer or Seller or neither is in control of the markets. It also helps us discern what the Smart Money (SM) is doing in these consolidation phases.
The chart shows following phases,
Accumulation Phase – SM finds prices low enough and accumulates their long positions in this range. Markets usually moves sideways for extended period of time and most patient of investors wear out. That is when SM buys from them for the inevitable rise that follows.
Mark Up – Here the price of the instrument that SM accumulated in the prior phase starts to move up. This is the phase when SM sits tight and let the market work for them.
Distribution – SM finds that the markets have reached an over priced state and starts distributing their holdings from accumulation phase. This caps the upside. Late momentum buyers are still buying and SM is happy unloading to them.
Mark Down – Here once the SM unloads everything to late buyers the price starts falling as SM are not supporting the price. The Sm now waits patiently for the prices to reach an under priced level so that they can stat a fresh phase of accumulation.
Re-Accumulation – Markets sometimes pause in a mark up phase when eager buyers take premature profits. Traders convinced of the up trend now buy any break that comes, this is the re-accumulation phase. Early in a trend this behavior makes sense, the same behavior late in the trend is suicidal.
Re-Distribution – Markets sometimes pause in a mark down phase when eager sellers take premature profits. Traders convinced of the down trend now sell any rally that comes, this is the re-distribution phase. Early in a trend this behavior makes sense, the same behavior late in the trend is suicidal.
Learn how to apply different Strategies to Wyckoff Market Cycle Phases?
Wyckoff Market Cycle Phases and Strategies
We have seen 3 strategies which can be employed to different market conditions. They were Buy Low Sell High, Buy Breaks and Sell Rallies and Buy Break Outs and Sell Break Downs.
The key is to know when to use which strategy. The adjacent chart shows just that.
Accumulation Phase – When we are in an accumulation phase the markets are moving sideways and always reverting back to a mean. We can easily find out when using a Market Profile Chart. During this phase we use Buy Low Sell High Strategy with a view that prices will revert back to mean. Read more here…..
Mark Up Phase – Here the trend begins once we Break Out from the consolidation of accumulation phase. So the strategy we employ is Buy Break Outs. The key is to find out when the markets are poised for a break out. Read more here…..
Re-Accumulation Phase – Here the trend is in early stage and any break is to be bought into. We use the Buy Breaks Strategy to trade the trend. Read more here….
Distribution Phase – When we are in an distribution phase the markets are moving sideways and always reverting back to a mean. We can easily find out when using a Market Profile Chart. During this phase we use Buy Low Sell High Strategy with a view that prices will revert back to mean. Read more here…..
Mark Down Phase – Here the trend begins once we Break Down from the consolidation of distribution phase. So the strategy we employ is Sell Break Downs. The key is to find out when the markets are poised for a break down. Read more here…..
Re-Distribution Phase – Here the trend is in early stage and any rally is to be sold into. We use the Sell Rallies Strategy to trade the trend. Read more here….
Understanding of these Wyckoff Market Cycle Phases helps us employ correct strategy based on current market conditions. Invaluable when competing for opportunities against the Smart Money.
Dean is a full-time trader and mentor, with experience of over 12 years. He trades using Market Profile and Order Flow Charts. Dean absolutely loves to trade.
He says “matching my wits against other traders is the most exciting game ever and I get paid to play”. He also likes sharing his learnings and mentoring committed traders.