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Understanding Market Phases

It is important for an investor or a trader to understand the life cycle of a stock. It is believed that this cycle repeats for each stock. Through an automated algorithm developed by, we have classified the life cycle of the stock into 6 distinct phases.

The diagram below describes each one of the phases of the stock. As the stock initially rises in the price, it goes through recovery phase. These are buyers that are first to recognize the value.

The recovery phase is followed by Accumulation Phase. More buyers are entering the market. The bullish phase, which follows the accumulation phase, the buyers have the control of the market, and are pushing the prices up.


Eventually, the Bullish phase ends. In most cases, the market will give you a warning before it goes to distribution phase. The warning phase is the early signs that sellers are begining to entering the market. A fight is taking place between the buyers and sellers.

During the Distribution Phase more sellers are entering the market, and are trying to drive the prices down. The Bearish phase is when the sellers have the control of the market, and the prices are going down.

In most instances, the phases are not as orderly. For example, a stock may go from accumulation phase back to Recovery Phase few times, before going forward to the Bullish Phase.


How to trade with the market phases ?

As a trader, you want to know how to incorporate market phase indicator into your trading.

The best way to use this information is to avoid taking trades in the opposite direction of the phase. If the stock is in distribution phase or bearish phase, avoid buying the stock. It is too difficult to pick a bottom for a stock. It is better to buy only stocks in accumulation or bullish phase. Risky buyers can consider recovery phase as well.

Similarly, the trader should avoid shorting/selling stocks that are in accumulation or bullish phase. Wait for signs of weakness before selling.

Market phase is one indicator. You should confirm your decision with other indicators also.

In case of doubt, refer to Trade Plan/Guru Trades on the stock analysis report. Also, it is better for the price to come near a support or resistance levels prior to making decision.

Where does market phase appear on the stock analysis report ?

The Market Phases will appears twice on the stock analysis report. It initially appears in the snapshot section of the report. Following is an example.

It appears with a more detailed explaination in the Technicals section of the report. Following is an example.

We hope that the tutorial was helpful to you in understanding the stock analysis report as well as the life cycle of a stock.

Wishing you the Best, Team


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About the website: For those who want to trade stocks or invest in stocks, provides stock market quote, stock research and stock analysis. Based on technical analysis(a stock charting and trend technique for trading stocks), and our automated trading tool can help you trade with confidence, learn when to buy stocks, learn when to sell stocks. If you trade with stock brokerage, or financial advisor, this website will provide you with valuable information. It is a useful trading system.
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