Market Cycles

By epyklion001 | General Crypto Trading and Investing | 3 Apr 2021

Cycles are part of life, for example, the cycle of seasons. Financial markets have cycles too. There are four phases in the market. It's important to know what phase the financial market is in as we humans tend to let out emotions in the way, especially greed. For example BTCUSD, almost every single trader is in the hype to get rich quickly. Of course, when the bears step in as many late buyers enters at its all time high, they'll get stopped out. Nobody likes losing money, the buyers will panic, sell and lose money. Those buyers entered at the wrong time. Understanding market cycles are essential to make sure you're not one of those late buyers.

The four phases:

Accumulation

The accumulation stage is when prices hit rock bottom. The downtrend will start to lose its momentum, and hedge funds begin to buy.

Markup

Bitcoin is currently in this stage. As prices start to move higher, it attracts buyers. In the end, late buyers come in and push the price to its ATH (all-time high).

Distribution

The distribution is when the uptrend loses its momentum. Using technical analysis, traders will spot a bearish head & shoulders pattern or something like that.

Decline

It's inevitable. The markets will go into a downtrend as investors sell their holdings to take their profits. Late buyers will panic as they bought during the distribution phase hoping the price will go up. They sell to avoid further losses. Then the market starts a new cycle again.

When should I buy as the decline happens and the price is shifting to the accumulation phase?

If you see many red candlesticks, big long bearish candles are good. Everyone is likely panic selling. All you have to do now is to wait until the market goes into a side trend for at least a few weeks or maybe years. Go to your daily timeframe on your favourite charting software, pull out your 200 EMA (the slow-moving average) and 50EMA (the fast-moving average). If the fast-moving average crosses the slow-moving average, buy, of course. This is what they call the "golden cross," which means the markup phase has started.

I'm not too good at writing articles, I think I should probably do those top 10 posts. Anyways these cycles can happen over years or just over a few hours. People who understand the cycles are more likely not to be fooled to buy at the wrong time.