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Accumulation / Distribution

What exactly is accumulation and distribution? It sounds simple, but I've never been able to figure out what they are talking about!

There are four market phases containing all price action. The accumulation phase has low range and volume and occurs at the bottoms of a prolonged bear market. We saw such a situation in the past in gold, which made a long-term bottom after a 21-22 year secular bear downtrend.

The bullish up trend move begins with increased daily range price bars and sharply rising prices above the highest highs of the previous twenty-day period. When we see that in a market, we know we are in a bullish uptrend phase, almost at the very beginning. Such a move could last for many years.

The distribution phase has wide range price bars of extreme volatility where the traders, who accumulated the underlying at the bottom, distribute it to the lesser informed public.

The bear phase begins when the market breaks sharply on wide range days below the lowest lows of the previous twenty days. There are four types of gaps, openings beyond the previous price bar's range, corresponding to market phases: general —day to day gaps; break away gaps – leaving a consolidation period; run away gaps – vertical or panic markets occurrences; and exhaustion gaps – ending the distribution phase.

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Tuesday, 25 June 2024

Derivative transactions, including futures, are complex and carry a high degree of risk. They are intended for sophisticated investors and are not suitable for everyone. There are numerous other factors related to the markets in general or to the implementation of any specific trading program which cannot be fully accounted for in the preparation of hypothetical performance results, and all of which can adversely affect actual trading results. For more information, see the Risk Disclosure Statement for Futures and Options.