Accumulation, Manupulation, Expansion, and Distribution
Last updated
Last updated
Sure, these are terms often used in trading to describe different market phases:
Accumulation: This is the phase where informed investors (often called "smart money") start buying or selling securities. These are usually large institutional investors or individuals with extensive market experience. In the accumulation phase, there's often little to no visible upward price movement for a stock because these investors buy cautiously to avoid increasing the price too quickly.
Manipulation: Sometimes called the "shakeout phase," manipulation often occurs after the accumulation phase. During this phase, the smart money may attempt to "shake out" weak holders by temporarily driving prices down (in the case of an accumulation/bullish setup) or up (in the case of a distribution/bearish setup). This creates panic selling or buying, allowing smart money to accumulate their position at favorable prices.
Expansion: Also known as the "markup phase" or "bull run," Expansion occurs after the manipulation phase. In this phase, the price starts to trend upward as more investors become aware of the security and start buying. This phase can last for months or even years, characterized by a steady increase in price and trading volume.
Distribution: This is the opposite of the accumulation phase. In the distribution phase, smart money begins to sell its positions to the market (the "crowd"). This selling can halt the upward trend, and if enough selling pressure is present, it can cause the price to start falling, leading to the markdown or bear market phase. Like the accumulation phase, smart money sells cautiously to avoid causing a sudden price drop.
Accumulation (A) of positions generally occurs during the Asian session. The accumulation is characterized by being a consolidation. Manipulation (M) usually occurs at the opening of the London session (sometimes at the NY open). It consists of taking the price to the opposite side of the true directional Expansion of the rest of the day. Distribution (D) occurs when Market Makers liquidate (exit) their positions.
This AMD-Principle is represented in every bar of every time frame (monthly, weekly, daily, 4 Hour, etc.) with a price value at which it starts trading (opening price), the highest price value (high), the lowest (low), and a value of the time it ends trading (close). The AMD-Principle can be observed in all financial markets - Forex, stocks, indices, commodities, bonds, etc.
