Wyckoff Market Cycle

Concentration/Accumulation

The start of each cycle is characterized by the emergence of an accumulation phase, which sets the range for the entire trading cycle. After the last culmination of sales, the exchange resembles a compressed spring in which energy is concentrated. The longer this period of the cycle lasts, compressing the price in a narrow corridor — the more powerful will be the releasing impulse, and, accordingly, the stronger will be the subsequent price fluctuation.

It is not uncommon for the support to break through on low trading volumes, triggering a Stop-Loss, which throws many investors out of the game. After that, the big players cause an upward price movement, forcing it to exceed the resistance level. The model is called stop hunting.

Markup

The second phase is the markup, which is a change in trend. This change causes the price to overcome the current limits in pursuit of new extremes. In this market position, Wyckoff recommends following the trend, finding entry points through the pullback zones.

The optimal entry would be buying already created orders. This phase is almost always characterized by rising volumes and the fixing of new indicators of the local minimum and maximum. The concentration of funds has ended along with the last phase, setting the direction of the cycle trend.

Distribution

The momentum from the first phase extinguishes when the market reaches a particular threshold, the cycle's maximum. As a result, the upper extremum is subjected to a second test.

Buyers failed to raise the peak signals — the start of available cash distribution. The phase is similar to the previous: the savviest traders are closing the open trades in an attempt to soften the results achieved and the income gained.

Orders that are abruptly closed are not permitted since they may produce an imbalance in supply and demand. To prevent instability, large-scaled traders launch an imitation game, causing price adjustments within the existing trading range.

Decline

The final phase of the cycle according to Wyckoff is the decline in price indicators. This phase is characterized by an abundance of supply orders and an almost uninterrupted downward price decline. The goal of any seasoned trader here is to keep a close eye on the analysis results, waiting for the concentration phase. As soon as a new cycle begins, it’s high time to take massive actions.