Advanced chapter, using the weekly level distribution of the last round of BTC bull market as an example, because the last round of BTC distribution is a standard textbook level distribution pattern, exactly the same as the Wyckoff distribution pattern, and has almost gone through all the distribution volume and price behaviors. The full text has a total of 6,000 words of detailed distribution. Distribution is more difficult to identify than accumulation, because the entire market is in a fomo state, a frenzy state, and is fully optimistic about the big bull market. BTC will go to 1 million. As a leek, I cannot avoid being attacked by fanatical emotions and will misidentify the market stage. On the one hand, I am afraid of missing out, and on the other hand, I am afraid of a pullback.
The occurrence of distribution does not mean that there will be a waterfall or a pullback immediately, especially for BTC, a global consensus and global capital participation. A large-scale distribution will last for more than a year. A small distribution may be completed in a month. I have posted a tweet before and observed that after the ENS distribution, ENS immediately fell, because the depth of small cottages is not enough, and there are some small capital main forces in them. Their distribution is often completed faster than accumulation.
The volume and price behavior of distribution and accumulation are just the opposite from the chart form. Accumulation emphasizes a stagnant market, with little trading volume and little volatility. The leeks themselves can't stand being trapped at a high level, and they can't get out of it for half a year or even longer. They are desperate and cut themselves. The main force has plenty of time to wait for the leeks to cut themselves at the bottom range, and then pick up the cheap chips. Distribution emphasizes high volatility (K inserts long needles up and down), high trading volume, and sticking to the middle and upper positions of the distribution range as much as possible, creating a possible breakthrough state, or making some false breakthroughs, so that the main force can sell chips to the leeks at a high level as much as possible, and it will not cause a decline.
(Quoting a fan friend’s explanation of distribution: Distribution means that the main force solemnly hands over the chips in its hands to you, and then carefully tells you to take care of yourself, and then take your money to spend.)
The distribution phase is divided into three major phases, and the volume and price patterns are as follows: 1. Initial supply, natural decline, ice line, rush to buy climax 2. Second test, upward rush and fall, new high upward rush and fall 3. Weakness signal, last supply point
Like, forward and comment. The following is a detailed explanation of the specific volume and price patterns:
PSY (Preliminary Supply)
The initial supply is the first signal in the distribution phase. After the initial supply, there must be a rush to buy to confirm that the initial supply signal on the left is true. The initial supply generally appears in the first vertical supply column after the last wave of accelerated rise. After the initial supply appears, an ice line is formed at its bottom, which is the bottom of this round of distribution range. The main force will provide demand release near the ice line when the distribution is not completed to ensure that the price will not fall and continue to distribute. The initial supply is a position of the main force that reduces its position at the top of the market, and at the same time tests whether there is enough demand in the market to undertake the distribution, so as to ensure that the main force will not cause a price drop when releasing the supply.
The meaning behind the initial supply is as follows:
1. Market demand testing
Market perception: The initial supply is the stage where major players begin to test market demand. They sell at high levels to see if the market can absorb the supply without a significant drop in prices.
Supply and demand dynamics: Through this process, they try to understand the supply and demand situation in the market, especially after a long period of growth, they need to confirm whether the demand of leeks keeps up, which is used as a basis for subsequent distribution decisions.
2. Reduce positions at high levels
Reducing risk: Near a market top, major traders may begin to reduce their positions to lock in profits and reduce risk.
Smooth trading: The reduction of positions in the initial supply phase is usually planned and carried out gradually to avoid causing too much impact on the market, try to ensure the price smoothness of the entire distribution phase, and lure leeks into the market to buy their own chips at high prices.
3. Indicates trend changes
Market Trend Signals: The appearance of initial supply is often seen as an early signal that the market trend may be about to change, especially after the last fast upward wave.
Early Warning: For those familiar with Wyckoff, it can provide early clues about when the supply and demand forces in a market are beginning to slowly shift.
4. Preparation for the distribution phase
Transition to the Distribution Phase: The appearance of initial supply signals that the market may be about to enter the distribution phase, which is a more obvious process of selling and reducing positions.
First supply PSY features and performance:
Price Action: After a long uptrend, the market begins to show signs of weakness. Prices may continue to rise, but the upward momentum begins to weaken.
Volume Changes: Volume begins to increase, which is a sign of active trading in the market top area. The increase in volume may be due to more sellers starting to enter the market, trying to sell stocks at high prices.
Market psychology: The initial supply usually occurs when market optimism is still dominant, and investors may not realize that the trend is about to change. There may not be a significant price drop at this stage, so it is easy to be overlooked.
Significance of identifying initial supply:
Signaling a market turn: Initial supply is an early sign that the market is shifting from an aggressive buyer's market to a more balanced or possible seller's market.
Prelude to a trend reversal: This is an early signal of the beginning of the distribution phase, indicating that large players may begin to reduce their positions and prepare to sell near the market top.
Ice Line ICE (There are ice lines in both the accumulation and distribution stages. The following is an introduction to the ice line of distribution)
In the Wyckoff method, the Ice Line in the distribution stage is a very strong support. Usually, the bottom after the initial supply appears is the support position for this round of distribution. If the distribution is not completed, the main force will provide demand here to prevent the price from breaking the ice. This is an extremely strong support position. If the price can break the ice, it means that the main force has completed the distribution of this stage, and the subsequent price will not return to the ice line. This is an extremely important form for identifying a downward trend.
Features and performance:
Definition: An ice line is usually a previously significant support level formed during a distribution phase that provides extremely strong support. When prices fall below this level, it means a complete shift in market supply and demand, followed by a supply-led downward trend.
Price behavior: When the price approaches the ice line, there may be a certain degree of rebound. If the distribution is not completed, the main force will provide demand near the ice line to ensure that the price will not fall. However, if it falls below the ice line, it means that the main force has completed the distribution. The break of the ice line is usually accompanied by an increase in trading volume. The main force has completed the distribution. The follow-up is to start smashing the market, trapping the leeks at a high level, and then slowly fall, and begin to prepare for the accumulation of funds.
Significance: Change of market trend: The breaking of the ice line is an important signal that the market is turning from the distribution stage to the downtrend. Decision point: It provides a key decision point for traders. The recognition of volume and price patterns near the ice line is related to the protection of positions and the decision of long and short positions.
Where it appears in the market cycle: Distribution phase: In the distribution phase, the confirmation of the ice line usually represents the confirmation of the market top, and breaking the ice line usually means the end of the distribution phase. Evaluation of market trends: The ice line is very useful in evaluating whether the market has completed the distribution phase and is ready to enter a downtrend.
Buy Climax BC
It is just the opposite of panic selling. It is a state of extreme fanaticism. The leeks are afraid of not being able to get on the train and afraid of missing out on a big rise, so they frantically chase orders to buy. The buying climax at the top of the range is a typical distribution pattern (if there is a buying climax at the bottom of the range, it has another meaning, which will be taught separately later). The main force believes that they have achieved their profit target, so they are ready to sell and harvest. Before shipping, they are ready to harvest the liquidity of the leeks and make a big positive line to lure the leeks. After seeing it, the leeks will definitely frantically chase orders to buy. After the buying climax appears, the market basically enters a distribution state.
Features and performance:
Price Action: A buying climax occurs at the end of a strong uptrend, when prices rise rapidly to an extreme point. It is usually accompanied by extreme optimism and greed among market participants.
Changes in trading volume: The rush to buy is often accompanied by a significant increase in trading volume. A large part of this trading volume is contributed by leeks. At this time, the main force will secretly release supply. High volume means there are a lot of trades taking place at high prices. There is no doubt that these transactions are provided by leeks.
Market psychology: A buying frenzy usually occurs when there is a general expectation that prices will continue to rise. At this stage, investors may be driven by excessive optimism and fear of missing out, and thus buy at high prices.
significance:
Premonition of trend change: The peak of buying is a key signal of the market top, indicating that the upward trend is about to end. Changes in market dynamics: After the peak of buying, the market often sees a natural drop in prices (Automatic Reaction), indicating that demand is beginning to weaken and supply is beginning to enter the market.
The buying climax of the distribution is at the stage top:
Near the market top: The buying spree usually occurs near the market top, marking the beginning of the distribution phase.
Subsequent behavior: After the buying spree, the market may enter a period of volatility, which includes natural declines and secondary tests, which are all part of the distribution phase.
Natural Fall AR
Automatic Reaction (AR) is a key link in the distribution phase, which occurs right after the buying climax (BC). It is a natural decline process in which the demand in the market is consumed in large quantities during the buying climax and there is no demand. It is exactly the opposite of the natural rebound caused by panic selling.
Features and performance:
Price behavior: After the rush, the market begins to see a natural price drop. This drop is because demand is consumed in large quantities during the rush, and when demand disappears, as long as there is a little supply, the price will naturally fall.
Volume Changes: Volume may remain high or decrease slightly during a natural decline. If volume is high, then supply may be starting to try to dominate the market.
significance:
Early signs of a market turn: Natural declines are often seen as early signs that the market may turn from an uptrend to a sideways or downtrend.
Weakened demand: After a large amount of demand has been consumed, the demand begins to weaken, and as long as the supply begins to be released, the price will fall or fall sharply.
Position in the distribution phase:
Early in the distribution phase: Natural declines are part of the distribution phase, marking the market's transition from the extreme optimism of the buying climax to a state of supply and demand balance or supply starting to dominate.
After a natural decline, the market may undergo a secondary test to further verify the strength of the market and the sustainability of the trend.
Second test ST
The secondary test (ST) in the distribution phase refers to the market testing the high point or reaching the extreme price level again after the buying climax (BC). This test is an important part of the distribution phase, used to verify whether the market has really reached the top.
Features and performance:
Price Action: A secondary test usually occurs after a buying climax, when the market attempts to reapproach or reach the highs made during the buying climax. Prices may rise, but usually do not exceed the highs made during the buying climax.
Volume Changes: During a secondary test, volume often decreases, which indicates that demand is waning. Declining volume is a key signal of a market top, indicating that previous buyer enthusiasm is beginning to fade and demand is insufficient.
Market Psychology: The secondary test reflects the market's reassessment of the previous high, with the main force considering whether to continue to push the market up.
significance:
Confirmation of market top: The secondary test helps confirm whether the market top has been formed and is an important signal of a change in market trend.
Progress in the Distribution Phase: It marks the deepening of the distribution phase, indicating that the main players may be reducing their positions.
Position in the market cycle:
Middle of the distribution phase: Secondary testing usually occurs in the middle of the distribution phase and is a key step in the formation of a market top.
Subsequent behavior: After the secondary test, the market may see a series of distribution behaviors, such as upthrust and last point of supply (LPSY).
UT
It is an important feature of the distribution stage. The upward rush and fallback usually occurs when the market tries to break through an important resistance level but ultimately fails. Its purpose is to lure the leeks to continue to buy at the key resistance position, and through false breakthroughs, the leeks are trapped at the highest position, while the short positions are knocked out. After the short stop loss order is triggered, it becomes a long buy order. The main force obtains liquidity and can continue to distribute the chips in its hands at a high level. The upward rush and fallback is a typical stop signal.
Features and performance:
Price Action: A pullback occurs when the price briefly breaks through an important resistance level, such as a previous high or a known resistance area. However, this breakout is quickly proven to be invalid and the price then quickly falls back below the resistance level.
Volume changes: Volume usually increases during an uptrend, showing the market's initial reaction to the breakout. Subsequent pullbacks may be accompanied by further increases in volume, indicating that sellers took over the market at high prices.
Market psychology: A pullback usually occurs when market sentiment is high and investors expect the market to continue to rise.
significance:
Signal of market top: A pullback from an upward surge is seen as a key signal of a market top, indicating that the power of demand is beginning to weaken and supply is beginning to dominate the market.
Signs of a trend change: A pullback from an upward surge indicates that the market may not be able to maintain the current uptrend, indicating a possible trend change.
Position in the market cycle:
Distribution Phase: A pullback from an uptrend often occurs during a distribution phase, especially when the market attempts to make new highs but fails.
Subsequent behavior: After the upward surge and fall, the market may enter a more obvious downward trend, and further distribution behavior may occur.
An upward surge and then a fallback is a typical stop behavior. After the upward surge and then a fallback, there may be another upward surge and then a fallback to a new high. It is the PROMAX version of UT and has the same meaning.
New highs and then declines (UTAD)
The appearance of distribution itself means that the market is about to enter a bear market, and the reappearance of upward rush and decline indicates that the distribution is nearing the end. The purpose is to let the last wave of leeks rush in and at the same time knock out the shorts that enter the market. The purpose of the main force doing this is to scare the price, but not to let the leeks see it, and also try to trap more leeks at the highest level. I believe that many leeks were still actively buying BTC at 69,000. This is the purpose of the upward rush and decline (UTAD) that set a new high.
Features and performance:
Price Action: In UTAD, prices will exceed previous highs, giving market participants the illusion that the market will continue to rise. However, this breakout quickly proves to be unsustainable and prices quickly fall back.
Volume changes: Volume may increase when reaching new highs, but as prices retreat, volume may increase further or remain high, indicating that sellers are taking over the market. High volume usually indicates heavy selling at high prices.
significance:
Strong signal of market top: UTAD is considered as a strong signal of market top formation, basically the bull market ends here.
Late stage of distribution: UTAD usually occurs in the late stage of distribution. The main force has completed its established goals, made a lot of money, and starts preparing to go on vacation.
Position in the market cycle:
Distribution stage: UTAD is a key link in the distribution stage, especially after the market has experienced a series of distribution behaviors. When you see it appear, you need to run away immediately.
Subsequent behavior: After UTAD, the market may enter a more obvious downward trend, transforming from bull to bear and starting a new round of market downward cycle.
Signal of Weakness (SOW)
In contrast to strong signals, weak signals occur in the distribution stage or at the end of the range, usually after a surge and fall. It is a sign of the end of distribution or the end of range oscillation. It can also appear in key support positions. If the volume breaks through the support and the supply leads the decline, you can short in a rebound without demand.
Features and performance:
Price Action: Weakness signals are usually seen when prices fail to maintain their upward trend or quickly fall back after reaching a new high. Prices may fail to break through or sustain a breakout near important resistance levels.
Changes in trading volume: Weak signals are often accompanied by abnormal fluctuations in trading volume, especially when the price tries to rise, the trading volume cannot increase significantly, which is a state of out-of-sync volume and price. When the price falls, if it is accompanied by an increase in trading volume, it shows that supply dominates the market.
significance:
Early warning of trend change: Weakness signals are important volume and price behaviors in the process of market top formation, which usually indicate that the trend is about to turn downward.
Characteristics of the distribution phase: In the distribution phase, weak signals suggest that the main players are reducing their long positions in preparation for a shift in supply and demand in the market.
Specific weakness signal identification: Unable to break through resistance: Shows weakness in the upside near the resistance level, unable to break through or maintain the upside.
High Pullback: A market that quickly retreats after reaching a new high, indicating a lack of buyer demand.
Weakened Volume: The failure of volume to increase significantly during price increases indicates reduced buyer participation.
Falling Support: A price break below a key support level, especially on increasing volume, indicates that seller supply has the upper hand and is dominating the subsequent market trend.
Last Supply Point LPSY When a weak signal appears, supply completely controls the market. We need to see that demand has dried up and disappeared so that we can enter the market on the right side. LPSY is the form of this demand rebound, which is exactly the opposite of the Last Demand Point (LPS).
Features and performance:
Price Action: The Last Supply Point is usually the last attempt to move higher during the Distribution Phase, when the market is no longer able to make new highs. This point is usually lower than the highs set earlier in the Distribution Phase, indicating extremely weak buyer demand.
Volume Changes: At the last supply point, volume is usually lower, indicating a reduction in buyer participation and a rally without demand. A reduction in volume is an important signal that market demand is exhausted.
Significance: Market turning point: The last supply point is the turning point when the market turns from the distribution stage to the downtrend. The end of the distribution stage: It usually appears at the end of the distribution stage, indicating that the main force has completed the selling at a high level.
Position in the market cycle:
Distribution Phase: The last supply point is the key link in identifying the formation of market tops during the distribution phase.
Subsequent behavior: After the last supply point, the market may begin a clear downward trend and enter the next market cycle.
