$1MBABYDOGE Formal scientists (hard sciences) and social scientists (epistemologists) rarely agree, but when discussing life, they say that it is governed by cycles, from nature to markets, in economic terms.
Therefore, it is essential to know the market cycles and identify where they are, in order to obtain some profit, as well as to plan the most appropriate investment strategy.
All cycles âadjustâ or follow a normal statistical distribution (Gaussian pattern), which is affected by multiple unexpected global economic and geopolitical factors.
The market has four phases:
1. Accumulation. It begins after the end of the previous cycle, when sellers have left the market and prices are perceived to be starting to stabilize.
In this phase, market volume is usually below average, market interest is low, there is no clear trend, and assets tend to trade within a narrow range.
Market sentiment dominated by FUD (fear, uncertainty or doubt).
Low price volatility.
Low trading volume.
Attractive period for long-term users looking to buy and hold.
2. Acceleration or Bullish. When the market rises in price at a monotonous increasing rate, new participants enter, resulting in a significant increase in volume.
Euphoria and excitement dominate the market.
Chart with an upward trend in price.
Significant increase in trading volume.
Stable and favorable economic situation.
We will find new highs or bull market.
At the end of this phase, FOMO is very visible and we can talk about a âbubbleâ, since the asset is overvalued.
3. Distribution. Some buyers become sellers, where the buyers and sellers in the market are in equilibrium. This subsequently creates tension between the bulls (Bull market) and the bears (Bear market).
It can cause market sentiment to shift from optimism to greed and fear, with uncertainty as to whether the uptrend will continue or a bear market is looming.
Market sentiment is affected by overconfidence, greed and uncertainty.
Low price volatility.
High trading volume, but no price increase.
It is the worst time to buy, given that the price is on the brink of the precipice.
4. Depression. This is the most frightening phase for most market participants. It begins as soon as supply exceeds demand in the distribution phase, and is a period fueled by fear in the market as the outlook becomes increasingly negative or recessionary (bear market).
The market is gripped by anxiety and panic.
Chart with downward trend.
High trading volume.
Unfavorable economic situation.
The acceleration of the bearish period slows down and another cycle begins.
I hope it will be useful when making decisions with your assets, buying, selling or taking other action at the most opportune time. Have a great afternoon.
