Market Stages: Accumulation, Markup, Distribution, and Markdown
Introduction
The market progresses through four stages: accumulation, markup, distribution, and markdown. Each phase reflects a shift in the balance between buyers and sellers, determining optimal entry and exit points as well as risk levels. Mastering the Wyckoff model, analyzing volumes and indicators, and considering the psychology of participants provide a structured approach to trading in any market.
Understanding market stages allows investors to build long-term asset holding strategies while enabling traders to quickly switch between trend-following and counter-trend tactics. This is what sets professionals apart from novices, who often act chaotically and succumb to emotions.
This article discusses key characteristics and working strategies for each of the four phases, providing real cases and practical recommendations to enhance effectiveness.
1. Accumulation Phase
1.1 Definition of Accumulation
Accumulation is the stage in which large players (institutions) gradually purchase an asset at favorable prices, keeping the price within a narrow range and avoiding sharp declines. Retail traders often overlook this process, perceiving the flat movement as a sign of trend absence.
1.2 Signs of Accumulation
- Volumes increase at local price lows and subsequently decrease.
- The price moves within a flat range with clear boundaries.
- Selling Climax → Automatic Rally → Secondary Test according to Wyckoff.
- OBV shows divergence: volume increases while price remains stable.
- Volume heat maps identify order clusters at support levels.
1.3 Institutional Mechanics
Institutions utilize iceberg and TWAP algorithms to break large orders into smaller parts for even placement. This helps conceal true volume and prevents sharp price movements that could scare off smaller market participants.
1.4 Practical Example of Accumulation
In January 2025, the shares of PJSC "LUKOIL" remained in the range of 6000–6300 ₽ for several weeks. A series of large volume clusters at the lower boundary indicated accumulation. After breaking out of the range, the stock rose to 7000 ₽, confirming active institutional involvement.
2. Markup Phase
2.1 Beginning of the Markup Phase
The markup phase begins with a breakout of the accumulation range to the upside, accompanied by a sharp increase in volume and acceleration of price. This is a window of opportunity for profit-taking on short positions and opening long ones.
2.2 Trading Strategies in the Uptrend
- Awaiting the candle to close above the distribution zone.
- Confirmation through EMA50 crossing above EMA200 with ADX above 25.
- Fibonacci retracements of 38-50% are used for position scaling.
- Trailing stops are set behind local lows to protect profits.
2.3 Trend Strength Metrics
- Concurrent increase in OBV and price indicates participation from large players.
- The number of new highs on daily and weekly charts reflects stability.
- The average length of the candle body compared to the wick suggests bullish dominance.
2.4 Example of the Markup Phase
Starting in February 2025, SBER broke the 300 ₽ level with volume 60% above the daily average. Over the next four trading days, the price rose to 345 ₽, demonstrating a strong momentum confirmed by EMA and rising RSI.
3. Distribution Phase
3.1 Key Signals of Distribution
- Increasing volume at each new high, but price returns within the range.
- Divergence in RSI and MACD: indicators do not confirm new peaks.
- Wyckoff patterns: Buying Climax, Automatic Reaction, Secondary Test Distribution.
3.2 Profit Taking
- Partial selling at the first signs of divergence.
- Closing remaining lots upon the formation of a "double top".
- Utilizing trailing behind key support levels.
3.3 Example of Distribution
In August 2024, "Yandex," after rising to 4000 ₽, entered the distribution phase: volumes during the climbs reached 120% of average, but the price consistently bounced back to 3900 ₽. Within a week, the price fell to 3500 ₽.
4. Markdown Phase
4.1 Signs of Beginning of Markdown
Breaking the support from the distribution range downward with a sharp spike in volumes is the primary marker of the onset of the bearish phase. This is often followed by a retest of the broken level.
4.2 Capital Protection Strategies
- Moving the stop-loss to break-even upon direction change.
- Exiting all long positions upon breaking an important level.
- Considering short positions upon confirmation of Selling Climax.
4.3 Indicators of Decline
- MACD crosses the signal line from top to bottom.
- RSI falls below 50 and approaches the oversold zone.
- Volume profile identifies "pain points" for sellers.
4.4 Practical Case of Decline
In November 2024, the MICEX index broke the 3400 points level with volume +80% above the daily average and retested it from above. A decline of 12% followed over three weeks.
5. The Role of Volumes and Indicators
5.1 Volumes at Stages
- Accumulation: volumes increase on price decline.
- Markup: volumes increase along with price.
- Distribution: volumes grow at peaks.
- Markdown: volumes increase at lows.
5.2 Technical Indicators
- RSI: identifies overbought/oversold zones.
- MACD: detects divergences and crossovers.
- EMA50/200: filters false movements.
- OBV and Volume Profile: confirm participation of large players.
5.3 Combining Methods
An optimal trading system uses volume and price indicators in conjunction with Wyckoff phase analysis to enhance the accuracy of signals.
6. Price Movement Structure
6.1 Support and Resistance Levels
These are formed during accumulation and distribution phases, serving as benchmarks for entry and exit, as well as for setting stop losses and take profits.
6.2 Breakouts and Retests
A breakout of a level followed by a retest is a classic entry point with low risk, confirming a new trend.
6.3 Trend Channels
Parallel lines that limit movement allow for the prediction of retracement and trend expansion levels.
7. Psychology and Market Participants
7.1 Emotion Triggers
Accumulation: institutional patience; Markup: FOMO attracting retail; Distribution: fear of loss of profit (FUD); Markdown: panic and capitulation.
7.2 Discipline and Trading Plan
One of the main rules is to limit risk to 1-2% of the deposit per trade and clearly outline entry and exit conditions to avoid impulsive decisions.
7.3 Role of Large Players
Institutions and market makers shape market phases by managing large volumes and influencing trend direction through algorithms and large orders.
8. Real Cases and Statistics
8.1 Gazprom Example
In June 2025, Gazprom was range-bound between 230–250 ₽, with volumes declining on downturns amid OBV divergence. Following the accumulation phase, the stock rose to 280 ₽ over two weeks.
8.2 S&P 500 Index
In March 2025, the index showed distribution: RSI diverged while reaching 4200 points, then the index fell by 8% over four weeks.
8.3 EUR/USD Currency Pair
Accumulation was observed in the range of 1.0850–1.0900 lasting 10 days, with volumes increasing by 30%, after which the price rose to 1.1000 within three days.
8.4 Liquidity and Spreads
During the markdown phase, the average spread of the top 5 stocks on the Moscow Exchange increased from 0.15% to 0.65%, confirming decreased liquidity and increased slippage.
9. Advanced Recommendations
9.1 Comprehensive Analysis
Framework: Identify the Wyckoff phase → Confirm with volumes and indicators → Apply levels and retests → Consider participant psychology.
9.2 Diversification of Approaches
Combining trend strategies for growth with counter-trend strategies for accumulation/distribution reduces overall risk and balances returns.
9.3 Continuous Learning
Regularly reviewing trades, participating in professional communities, and reading case studies help refine skills and adapt to the changing market.
10. Conclusion
Studying market phases—accumulation, markup, distribution, and markdown—is fundamental for successful trading and investing. Integrating Wyckoff models, volume analysis, technical indicators, and accounting for human psychology enables informed decision-making, minimizes risks, and optimizes results. A systematic approach to analyzing market phases creates sustainable advantages and long-term capital growth.
