Accumulation, Manipulation, Distribution Market Cycle

Accumulation, Manipulation, Distribution also known as the power of 3 and AMD for short. This is a very common pattern, concept or a market cycle, whatever you want to call it. It happens in every market in existence and it is one of the main driving force of the market makers. 

  1. Accumulation: This phase occurs when smart money or institutional investors believe that an asset is undervalued and offers potential for future appreciation. During accumulation, these investors start buying the asset gradually, often at lower prices, while trying to avoid attracting attention. As a result, prices may trade within a relatively tight range or undergo consolidation. Accumulation is characterized by subdued trading activity and may last for an extended period as investors build their positions.
  2. Manipulation: In the manipulation phase, market participants with significant resources or influence seek to control the price of the asset to their advantage. This manipulation can take various forms, such as spreading false rumors, creating artificial supply or demand through large trades, or engaging in deceptive trading practices. The goal of manipulation is to influence market sentiment and attract other traders to participate in the market. Manipulation can lead to temporary price distortions, causing inexperienced traders to enter positions based on false signals.
  3. Distribution: Once the asset’s price has been artificially inflated through manipulation and reaches levels deemed favorable by smart money or institutional investors, the distribution phase begins. During this phase, those who accumulated the asset during the early stages start selling their positions to less informed traders who were attracted to the market by the manipulated price movements. Prices may rise further as demand increases, but this upward movement is often unsustainable. Eventually, the smart money begins to exit their positions, leading to a reversal or downturn in prices as supply exceeds demand. Distribution is marked by increasing volatility and volume as selling pressure intensifies.

These phases of the AMD cycle are often associated with the broader principles of market manipulation and investor psychology. Traders and analysts use techniques such as volume analysis, price patterns, and trend indicators to identify signs of accumulation, manipulation, and distribution in price charts. Understanding these phases can help traders anticipate potential market reversals or trend continuations and develop more informed trading strategies.

Let’s look at some chart examples now:


Accumulation, Manipulation, Distribution Market Cycle

Accumulation is simply a consolidation phase within the market cycle. It is a range in price where early buyers/sellers enter the market. It is also a phase where market makers accumulate large amounts of orders before manipulating the price.

Prolonged periods of consolidation almost always guarantee a sweep of liquidity before pushing price in the anticipated direction. This is why you should always avoid entering trades if you spot a range that hasn’t broken to either side for a longer period of time.

During the accumulation phase, the market makers are buying and selling the asset at the same time, this is why price is kept in a very tight range. This accumulation usually happens around key levels in price, such a strong daily/4h low/high or a strong psychological level. As you can see in the example above, the price had a strong push to the downside and consolidated just above the daily low. Most traders would signal this as the price coming down to retest the previous demand zone and get trapped in buys while the market makers are patiently stacking orders to manipulate the lows and grab even more liquidity for a bullish move.


Accumulation, Manipulation, Distribution

Manipulation also known as the “fake move” happens after the accumulation phase. This is where most traders get stopped out and market makers get to close their short trades and accumulate more buys with the extra liquidity they just created, pushing the price higher (Vice versa if it’s a bearish scenario).

Whenever you spot a prolonged range you can anticipate the manipulation and wait for the sweep of liquidity before looking to enter the trade. This way you avoid becoming the liquidity for the market makers during the accumulation phase. The manipulation phase also grabs extra liquidity by triggering the breakout traders who did anticipate a break to the downside but didn’t get to close their trades because of the sharp nature of the manipulation.

The manipulation phase often happens during high impact news as it’s one of the main ways to create a huge spike in liquidity.


Accumulation, Manipulation, Distribution Market Cycle

The third phase in this market cycle is the distribution. It comes after the market created a fake move, stopping out all or most previous traders and pushing the price where it wanted to go initially.

The distribution phase usually has a very strong push in the desired direction breaking previous structures created by the manipulation and accumulation periods. At this point the market makers made their money on the way down and all the orders accumulated during the first phase are massively in profit. At this point other traders see the momentum and try to get in on the move helping the market makers push the price. That’s where the market makers start offloading their positions and that’s what creates that slow in momentum as price comes near a strong high.

Understanding the intentions behind the AMD market cycle will help you avoid unnecessary losses you would have taken during the first and second phase and potentially allow you to jump in on the massive momentum before the distribution phase starts.

To Summaraise

  • Prolonged periods of accumulation almost always guarantee a sweep of liquidity.
  • AMD is not used to predict the future, it is to understand the intentions and actions of the market makers so you can adjust your strategy accordingly.
  • Finding entry opportunities during the manipulation/distribution phase is ideal.

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