The phenomenon of investors when stock prices rise, they tend to choose to buy it. When the price drops, investors rush to sell it. This natural phenomenon continues to repeat itself to form patterns, trends and stock cycles.
Stock market cycles can affect market participants and investors widely. Therefore, it is good for investors to understand how the cycle of the stock market works. Here are 4 stock market cycles that must be known so as not to lose money and investors can make the right decisions.
What Is a Stock Cycle?
It could be interpreted that the stock cycle is a stock price fluctuation that continues to occur repeatedly in a certain pattern. This natural phenomenon in the Indonesian stock market is the principle of a technical technique known as “history repeat itself”.
Market players, especially new investors, need to understand the cycles that exist in the Indonesian stock market as a provision for investing. Moreover, the movement of stock prices is very volatile with a period that is difficult to predict.
Types of Stock Cycles
By understanding the cycle of the stock market, investors can find out the most appropriate steps that need to be taken in order to get maximum returns. There are at least 4 main phases in this cycle, namely accumulation, distribution, mark up, and mark down.
1. Accumulation
In the early stages of the stock market cycle, there is an accumulation process with stock prices that tend to be low and quite affordable to buy. Falling stock prices cause buying requests to be more dominant or more than selling requests.
The stock price seemed to be on sale so that many were bought, which was followed by an increase in the share price, although not too significant. In this early cycle tends sideways with the risk of fluctuations in stock prices is still very high.
It is recommended for novice investors to wait and see the transition of stocks to the next phase. You do this by applying technical analysis. In essence, a phase shift when it occurs breakout due to high transaction activity.
2. Mark up
The stock price starts to come out of sideways characterized by the emergence of conditions breakout due to the large volume of transactions. At this stage the stock price shows an upward movement.
For trader Retailers who haven’t had time to buy at lower prices, often decide to make purchases when prices move up. Cause demand which began to dominate rather than supply.
When this phenomenon occurs, stock prices will continue to rise with a fairly fast duration. Finally, the rising stock price touched a price that was considered expensive. In the graph will be formed higher high (higher peak prices).
3. Distribution
Shift again to the next phase, namely distribution which is dominated by selling by market players. Those who are no longer making purchases choose to sell or profit taking. This phenomenon will result in the stock price falling and returning to the price sideways (stable position).
At this level demand and supply tend to be balanced, but that does not mean safe. Stock prices can move up or down with 50:50 odds. If the pressure from selling is stronger, the stock price will move in the opposite direction or reversal.
This phenomenon will usually be followed by investors who sell shares to enjoy the yield. When the selling target of the big investors has been reached, the stock price will move down. However, then the price will experience a slight increase due to lower transaction volumes.
4. Mark down
In this cycle there is a mark down phase which shows a decline in stock prices. Prices fell due to the actions of large investors who released the shares they had previously bought. Finally, the shares circulating in the market are mostly controlled by the shareholders trader retail.
However, during this phase it is also not uncommon for “panic selling” conditions to occur with para action trader retailer participating in selling the stock. This is because retailers are worried about the share price falling and even reaching the lowest level as in the accumulation phase.
When this condition occurs, selling transactions will dominate the market. Finally, the share price also decreased drastically.
When to Use a Stock Cycle?
The stock market cycle can be used when market participants want to buy or sell shares trading. Understanding the stock market cycle is one of the technical analysis that needs to be observed for the para trader given the very rapid fluctuations in stock prices.
In addition to understanding the stock market cycle above, trader You can use other indicators to determine the right time to buy or sell stocks. For example, the popular Sell In May and Go Away (sold shares in May and bought them again in November).
Using stock market cycles and other analyzes is necessary because a security may respond differently to changes in the stock market.
Want to learn trading stock any further? Download the RHB Tradesmart ID application on the Play Store and App Store. Application trading online shares with various features that can be utilized trader to get optimal yields.
That is the discussion about the cycle of stocks in the stock market in Indonesia. Market participants include investors as well trader beginners need the ability to understand this cycle to complete technical and fundamental analysis before making a transaction.
Reference:
Risky Setyo Nugroho. 2023. “Knowing and Understanding the Stock Market Cycle”. Idxchannel.com
Ayu Utami Larasati. 2023. “Know the 4 Stock Market Cycles So You Don’t Lose”. Tagar.id
2023-09-05 03:04:33
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