Market Phases Explained: Accumulation, Expansion, Distribution
Market Phases Explained: Accumulation, Expansion, Distribution, Reset
Difficulty: (Advanced)
Markets do not move randomly. They rotate through repeatable phases driven by liquidity, psychology, and participation. Understanding market phases helps traders stop forcing strategies and start trading in alignment with the current environment.
WHY MARKET PHASES MATTER
Most traders struggle not because their strategy is bad, but because they apply it in the wrong market phase.
Breakout strategies fail in accumulation
Mean-reversion fails during expansion
Trend-following fails in distribution
Reversal trading fails before reset is complete
Market phases explain when a strategy works, not just how .
Price action, indicators, and volume behave differently in each phase.
THE FOUR MARKET PHASES
Markets move in a repeating cycle:
Accumulation
Expansion
Distribution
Reset
Each phase has unique characteristics, risks, and opportunities.
1. ACCUMULATION (QUIET POSITIONING)
Accumulation occurs after a decline or prolonged sideways movement.
This is where smart money builds positions quietly.
Key characteristics:
Price moves sideways in a range
Volatility is low
Breakouts frequently fail
Volume is stable or slightly rising
What is really happening:
Large players accumulate positions without moving price too much. Liquidity is absorbed.
Indicator behavior:
RSI oscillates between 40 and 60
MACD hovers near the zero line
Volume spikes are quickly absorbed
Best strategies:
Range trading
Mean reversion
Patience and preparation
2. EXPANSION (TREND DEVELOPMENT)
Expansion begins when pr