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One assumption applies to stock analysis techniques and other investment tools. It is to assume that the instrument price movement will follow the same pattern (cycle) from time to time. The job of traders and investors is to take advantage of this cycle to maximize profits.
The word collect (accumulate) and distribution (distribution) are two words that describe two phases in a cycle. The first use of these two words in the stock world was by Richard Wyckoff as Wyckoff. What phase? Check out the discussion below:
What is stock accumulation?
Stock accumulation is the period when the share price decreases. (below normal or below true value) in the cumulative term traders and investors In particular, institutional investors flock to buy these stocks.
This happens because all traders and investors want to buy stocks when the price goes down. Therefore, during the accumulation Many traders and investors buy these instruments. When people and institutions come in to buy a lot The share price will move up and enter the next phase, the participation phase.
What is stock distribution?
The opposite of the accumulation phase is the dispersion phase.
The selling period is the period when most of the shares are sold to the market. causing the price of the asset to go down The process of selling these shares may be initiated by institutional or individual investors with large capital and exacerbated by FOMO investors who are reluctant to make losses.
This usually happens when the share price has risen to the point where investors are aiming to make a profit. This condition is getting worse as investors sell a lot of their assets to avoid deeper losses (cut losses).
However, the spreading distance can be profitable for some traders. Traders who benefit from this spreading phase are known as short sellers short sellers Sell shares borrowed from a broker So when the share price falls The amount that must be returned to the broker is also reduced. As a result, they benefit.
How to view stock collection and distribution patterns
Both accumulation and distribution phases often occur when the stock price line looks as if it is facing sideways. This can happen due to a dominance struggle between buyers and sellers. (Bulls and Bears) The difference is that in the cumulative phase, the bull wins the market dominance. While in the selling phase, the bears win the market.
So how to determine if the resulting phase is the cumulative phase or the diffuse phase? Here are some steps you can take:
1. Installation of support and resistance levels
support and resistance They are two important lines that traders must own in every time frame. To identify the accumulation and distribution process These two lines can guide whether a stock’s price is heading for a bottom (support) or a high (resistance).
It is said that stocks are in the accumulating range. If the price action continues to create a higher low than the previous low (above the low) at the highest point, the stock will enter the engagement phase if there is a breakout at the resistance you have set up.
Conversely, the share price is considered entering the sell phase if the movement continues to produce the share price. lower. because this means pressure from higher sales team pressure from the purchasing team
2. Check stock price patterns
In many cases, stock price movements take some unintentional patterns. These patterns are wedges, triangles, etc. You can use candlestick To examine the stock price patterns formed by these patterns, e.g. Three White Soldiers, Three Black Men, etc.
even if it happened by chance But these price patterns are important in helping to identify the phases of a stock’s price movement. And it’s important to determine when you should buy and when you should sell the asset.
3. Using the trend strength indicator
because they tend to look mediocre sideTraders will find it difficult to determine when a stock’s price action will rise and become cumulative. or going down and entering the distribution phase to help identify this. You can use trend strength indicators such as the RSI indicator or the Average Direction Indicator (ADX).
Indicators like these can help you determine if the market is overbought or not. (price tends to increase in accumulation) or oversold In addition, this technical indicator can help you to determine whether a trend reversal or not.
4. Observe the movement of the city.
Bandar is an institutional investor, such as an investment management firm or a hedge company. or retail investors But with good capital and influence, like Anthony Salim, the buying and selling transactions performed by these bookmakers need to be observed. Because they are players with huge capital and the best analytical team. So what they do can affect the stock market cycle.
Information about the movement of these cities is known as genetics. Some stock trading applications already have this feature in the application. However, if the application you are using does not Or would you like more complete Bandarmology information? you can download bandarmology app separate
Bandarmology data can be used as one of the benchmarks for accumulation and distribution distances by reducing the 5 dealers or brokers with the highest purchase value for that day. There are 5 dealers or brokers with the highest selling value at the same time. If the value is positive (buy > sell), it is likely that this phase is cumulative. and vice versa
How to take advantage of movement accumulation and distribution
There are two types of stock transactions based on position: long-term transactions and short-term transactions. Long-term transactions are performed by buying stocks when prices are low and selling when prices are high. short sale Sell stock when price is high and will make a profit when the share price falls
Long-term transactions are the right ones for you to open when you know the dealer is accumulating shares. (accumulation phase) On the contrary, short sale It is suitable to be opened when the stock enters the underwriting phase. However, the latter is a high-risk trading technique. It uses shares borrowed from brokers. Also, so far, short selling is not allowed in Indonesia after the COVID-19 pandemic.
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