Trading Basics

Bulls, Bears, and Market Cycles

Markets cycle through four phases — recognising which phase you are in guides strategy selection.

Key rules

  1. Four phases: accumulation, markup, distribution, markdown
  2. Bull market = HH/HL; bear market = LH/LL
  3. Trend-follow during markup and markdown phases
  4. Range-trade during accumulation and distribution
  5. Reduce activity in unclear transition zones

Markets cycle through four phases: accumulation (smart money buying quietly), markup (uptrend, retail joins), distribution (smart money selling quietly), and markdown (downtrend). Recognising the current phase guides strategy selection.

A bull market is characterised by higher highs and higher lows over time. A bear market shows lower highs and lower lows. Most retail traders over-trade in all conditions rather than adapting to the current phase.

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