Distribution Phases

Distribution phases occur when large holders or smart money entities systematically sell their positions to retail buyers. This process usually happens after a significant price appreciation, where the market is characterized by high euphoria and optimism.

During this phase, volume remains high, but the price fails to make significant new highs, signaling that supply is beginning to outweigh demand. Traders analyze volume profiles and order flow to detect these patterns.

Recognizing a distribution phase is crucial for taking profits before a market correction or trend reversal. It is the opposite of an accumulation phase, where smart money buys at low prices.

By understanding the market cycle, traders can avoid being caught in the late stages of a bull market. It is a key concept in technical and volume-based analysis.