1. Accumulation (Buying Phase)
- Happens after a bear market (when prices are low).
- Professional traders secretly buy up large amounts of stock without causing a noticeable price increase.
- They target the floating supply—shares held by ordinary investors that can be freely traded.
- As more stock is absorbed by professionals, there’s less supply available for sale.
- When enough stock is accumulated (critical mass), prices can rise freely because there’s no selling pressure left.
- If this happens across multiple stocks, it triggers a bull market (prices rise).
- Happens at the top of a bull market when prices are high.
- Professionals slowly sell their stock at higher prices, avoiding sudden drops.
- Market-makers (intermediaries) help absorb the selling, ensuring prices stay stable while selling continues.
- If selling pressure gets too strong, professionals temporarily support the price to allow more selling at higher levels.
- Once most professionals are out, the market lacks support and begins to fall, triggering a bear market (prices drop).
- Syndicate traders control supply and demand to move prices in their favor.
- Accumulation happens quietly at low prices before a bull market.
- Distribution happens gradually at high prices before a bear market.
- Ordinary investors often buy at the top (distribution phase) and sell at the bottom (accumulation phase)—playing right into professional traders' hands.
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