FINANCIAL MARKET PHASES

Market activities on stock market oscillate in four or five distinct phases namely the accumulation phase, the mark-up phase, the greed/late majority phase, the distribution phase and the mark-down/declining phase.

Today, we shall be discussing the accumulation phase which is the first among all.

Accumulation phase is a phase when the experienced traders and investors begin to buy having seen the market has bottomed or the worst is over.

Meanwhile, the general market sentiment is still bearish and those who were long in their position feel disgusted or impatient holding the stocks by selling them. Prices flatten in this phase and for every seller throwing in the towel, someone is there to pick it up at a discount. Accumulation phase often falls into the end of a downtrend where ordinary investors believe that more bearishness is likely and their overall outlook is pessimistic. Eventually market sentiment begins to switch from negative to neutral thereby locking the pessimist in bad position.

It must be emphasized at the same time that no trader is sure that he is picking the bottom during a downtrend; this is what makes trading the accumulation phase difficult.

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