Understanding Accumulation and Distribution Market Cycles

Market cycles of accumulation and distribution are phases where institutional capital quietly builds or unloads large positions before a major price move. Accumulation typically occurs in a range after a downtrend, characterized by high volume on up-days and fading volume on down-days, signaling smart money absorption. Distribution happens near the top of an uptrend through choppy, high-volume sideways action as heavy inventory is shifted to retail participants.

Spotting these phases can keep you aligned with the true trend, which is vital when managing strict daily loss limits and consistency rules on an evaluation account. Prematurely chasing a breakout without recognizing prior accumulation often leads to false breakouts and quick drawdowns.

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