What are Market Cycles?

Market cycles are recurring patterns in financial markets that move through different phases of expansion and contraction. These cycles are driven by changes in market psychology, economic conditions, and trader behavior, creating predictable patterns that traders can use for strategic planning.

Cycle Phases

Accumulation Phase

• Price consolidation
• Low volatility
• Smart money buying
• Reduced selling pressure
• Base formation

Mark-Up Phase

• Increasing prices
• Growing momentum
• Higher trading volume
• Bullish sentiment
• New market highs

Distribution Phase

• Price topping
• Increased volatility
• Smart money selling
• Weakening momentum
• Volume divergence

Mark-Down Phase

• Declining prices
• Bearish sentiment
• Capitulation events
• Reduced volume
• Market bottoming

Trading Applications

Strategy Alignment

• Phase-specific tactics
• Risk management adjustment
• Time frame selection
• Position sizing
• Entry/exit timing

Related Terms

• Bull Market
• Bear Market
• Market Psychology
• Volume Analysis