What Are Market Cycles?

What Are Market Cycles?

Market cycles are patterns of rise and fall in market prices, algostocks.com

reflecting the collective behavior of investors. algostocks

These cycles can be influenced by economic conditions, investor sentiment, and other external factors.

Key Phases of Market Cycles

Market cycles typically include four main phases:

  1. Accumulation Phase: This phase occurs after a market downturn, when prices are low, and savvy investors start buying undervalued assets.
  2. Markup Phase: During this phase, the market begins to recover, prices rise, and more investors start to buy, driven by improving economic conditions and investor confidence.
  3. Distribution Phase: This phase is characterized by peak market prices, where experienced investors start selling their holdings to lock in profits, anticipating a downturn.
  4. Markdown Phase: The market experiences a decline in this phase, prices fall, and many investors sell off their holdings, often driven by fear and negative market sentiment.

Duration and Recurrence of Market Cycles

Market cycles can vary significantly in duration and intensity.

Some cycles may last for several years, while others might be shorter or longer, influenced by various economic and geopolitical factors.