Once you are able to identify what stage the market(s) are in, you can then trade according to those characteristics.

After a while you won't even have to think about whether you should be long or short. 

You will know, without question, exactly what you should be doing NOW. 

You will either be focusing on long positions, short positions, 

or you will stay safely in cash - just by glancing at a chart!

The side illustration is of the four stages that stocks (and ALL markets) go through. 

This happens in all time frames whether it is a monthly chart, weekly chart, daily chart, 

or an intraday chart.

Think of it as similar to the 4 seasons (in the Northeast at least), there has always been a somewhat smooth transition from winter to spring to summer to fall /  autumn - it's a similar recurring cycle seen in nature as well as the financial markets.

For example:

Winter is kind of slow & boring (Stage 1 Accumulation), next, we "Spring" to life with prices jumping higher (Stage 2 Bull Market), then, we get into the lazy, sideways days of Summer (Stage 3 Distribution), and finally, we hit Fall (Stage 4 Bear Market), where not only the leaves are falling, but so are prices!

Another incredible example of nature and the markets having similarities is the Fibonacci Sequence.  In nature, it's found in pinecone scales, sunflower seeds and SO many other examples - and it can be applied to the stock markets, etc. as well to determine key levels of buying and selling by major institutions.  

Refer to the Home Page for more information on the Fibonacci Sequence.

Coincidence - don't think so, since it's been going on / recurring for centuries!

The fact that these recurring patterns occur in all time frames is directly related to fractals, which is the never ending pattern of the monthly chart "containing" the weekly chart, the weekly chart "containing" the daily chart, the daily chart "containing" the hourly chart, which "contains" the 15 minute chart, etc..

This side illustration is a simple, symmetrical bell curve representing the distribution of data points and, in this particular case, is being applied to market behavior.

What needs to be understood is that both price & volume in a Stage 2 bull market (higher prices) is almost the exact "mirror image" of both price & volume in a Stage 4 bear market (lower prices) - which really makes trading both sides much more orderly as well as easier.

Keep in mind, it is a symmetrical bell curve, which, by definition, indicates that the down move (Stage 4) will be the mirror image of the up move (Stage 2) and vice-versa. 

Also, keep in mind, that nothing is exact by any means, come on, we're talking the markets here.  

To succeed in the markets, one must learn to realize that it is an odds game / a probabilities game, but there are so many ways, with practice, study & patience, to put those odds in your favor consistently - and that - over time- creates fortunes!

Take a look at the chart on the Home Page - it could be a stock, commodity, currency, etc., but it is clearly transitioning from Stage 2 (Uptrend) to Stage 3 (Distribution) to Stage 4 (Downtrend).  

It doesn't matter what underlying market is involved (or what time frame chart we're looking at), the Stages are almost constant!

This is how the "Smart Money" manipulate the markets - they've been doing this forever!

It is very easy (for the "Smart Money") to manage / manipulate those who have no idea about how the true structure of the markets operate.  

Confused small (Retail) traders make it all the more easy for the "Smart Money" to "toy" with them and then happily take their money.

Side Note:

If you make trading the stock (or commodity, bond and / or currency) markets too complicated, then it is just not worth doing.  

The following information is meant to simply explain how to keep a trader  / investor on the proper side of the market - the "how to" as far as actually profitably executing, monitoring and exiting trades is where an experienced Advisory Service comes into the picture.

To trade profitably, once the set-up is apparent, action is taken quickly & decisively, otherwise the opportunity "slips" away.  

In successful trading, you have to learn to manage probability.  

Once you can do that, you can reduce the damaging emotion in both winning & losing trades, which reduces stress significantly.

You come to truly realize that you can't have control of the future - the good news, however,  is that this all can be learned over time with patience and practice.

When it comes to the markets: 

"What you don't know could hurt you VERY much!"

You will learn from reading below that the markets are far from random, that they move within an almost musical symmetry and flow - yes - the smaller "ebbs & flows" within the main price moves can appear random, as much of the market "noise" is, but the overall movement has "method" behind it.

Much of what will be discussed is based upon the work of Richard Wyckoff back in the early 1930's and expanded upon by the late Tom Williams in the late 1980's.

Golden Gate University in San Francisco has offered a Wyckoff Method Course since 1987.

Let's take a look at the characteristics of the four market stages:

Stage 1 is the stage right after a prolonged downtrend. This stock (commodity, currency, etc.) has been going down but now it is starting to trade sideways forming a base (Accumulation Stage). The sellers who once had the upper hand are now beginning to lose their power because of the buyers starting to get more aggressive. The stock just drifts sideways, with very little activity / volatility - without a clear trend. 

During this stage, it is very important to see low volume in a well defined sideways channel with an occasional volume "blip" here and there.  The diminishing selling by the big players is reflected in the lower selling volume.

Everyone hates this stock!

This is known as the Accumulation Phase (Stage 1), where the “Smart Money” (the 10% of professional traders) are quietly accumulating (purchasing) their stocks (inventory). 

Initially prices compress (small price ranges / very low volume) as the Professionals balance their books.

The middle of this price compression establishes a Fair Value Price Line, which acts as a "magnet" for near future price movements.

Then the manipulation begins - the smart money "shifts" prices up above the Fair Value Price Line, just to "shift" them down below the Fair Value Price Line (sometimes as few as two times, sometimes as many as ten times - the market just has to "play itself out").

This is called a multi-leg price expansion.

This very choppy price action traps the small, unaware retail traders (weak hands / "dumb money" ) on both the long and short side of the market.  

This is known as price expansion / price exploration.

This "micro" phase at the end of Stage 1 is referred to as "the Master Pattern".

The majority of retail traders never learn how it works - and that's why the 90% rule almost always applies:

-90% of small / retail traders lose 90% of their account(s) within 90 days of trading.

It is during this "whipsawing" event where most inexperienced traders are lured in to making money-losing mistake after money-losing mistake, until the Professionals / Market Makers have accumulated their best positions (below the Fair Value Price Line) 

and then (and only then) decide it is time for the market to begin its new trend (up trend in this particular case) in sincerity.

The Smart Money is ALWAYS buying below the Fair Value Price Line (before an up trend), that is, doing exactly the opposite of the "dumb money" (small retail traders).

This is how the markets function - and have always operated this way.

Once these “weak hands” have been eliminated, the lack of supply allows the stock to move higher because even a small amount of demand will overwhelm the negligible supply / inventory. This is referred to as the line of least resistance.

Who, by the way, is the "Smart Money"?

The Institutions: 

The Big Banks, Insurance Companies, Hedge & Pension Funds, Mutual Funds, Sovereign Wealth Funds, Market Makers, computer driven High Frequency Trading (HFT) as well as very experienced / professional traders - essentially all of the deep pocketed, big money traders and investors.

The Institutions are also known as The Professionals.

It is the Smart Money that moves the markets due to their sheer financial size.

Also, due to their sheer size, The Professionals are able to manipulate  / play on the small (Retail) traders' emotions all during the up move (Bull Market) and all during the subsequent down move (Bear Market).  

What is helpful is that the Smart Money's activities are more visible due to their size.

One crucial piece of information that the Smart Money cannot hide, however, is volume.  

A heavy amount of volume (on an up move or down move) shows a good deal of Smart Money / Institutional interest behind the move.

A lighter / diminishing volume (on an up move or down move) shows Smart Money / Institutional interest has decreased considerably (as reflected in less volume) and the current price direction now comes into question.

The Smart Money are very "well rehearsed" with their many "bags-of-tricks" and know just when and how to manipulate the inexperienced traders / investors into taking bad trades, and once again, losing their money to The  Professional players.

Once, observing volume in conjunction with price movement, one is able to decipher their moves, a trader can (many times), know their intentions in advance and align with what they are doing.

This indicates (to the alert trader) the "path-of-least-resistance" as far as future price moves and allows the trader to get on board with the Smart Money.

The Smart Money must do their buying slowly & gradually in order to not drive prices higher too quickly, that is, until they have absorbed most of the existing supply 

(the smart money's subtle way of "cornering the market").

Although The Professionals manipulate price during up trends & during down trends, the majority of the (subtle) price manipulation takes place during the sideways stages of the market cycle:

Stage 1 Accumulation (Professional buying) 

&

Stage 3 Distribution (Professional selling)

This accumulation stage can last anywhere from several weeks to many months and is initially marked by low volume and boring price movement, "marching" sideways within 

a well defined  channel.  

Then the price expansion (volatile) phase occurs (where most inexperienced traders lose big time via whipsaw), before breaking out into...

Finally stocks break out of the sideways channel into Stage 2, which begins the uptrend 

(Mark Up / Bull Stage).   

This is where the majority of the money is made in the stock market. 

With many years of study & experience, you are able to observe - in real time - the market change / transition  from bearish - to sideways - to BULLISH - time and time again!

Once the 20 period Moving Average begins to go from flat to upward sloping, that's when it's "game on!"

During the uptrend, of course, you will see numerous (low volume) price pullbacks / retracements - some violent - but then the buyers will step back in, causing prices to once again rise.

It's at this time that the ("insider") market participants see that price is currently far below (perceived) value and that price needs to move up (over time) in order to once again become "efficient", that is, that price & perceived value, once again, align.

As the stock(s) break out of the sideways channel, it is ESSENTIAL that the breakout occurs on high trading volume to be proven authentic. 

Important side note:

As always emphasized, nothing in the markets works 100% of the time - as with life for that matter.

Reason for saying the above is that sometimes the upside breakout of the sideways channel occurs on moderate volume, but can still be valid IF the market had been trading sideways for 

a relatively long amount of TIME (known as building a "cause" in Volume Spread Analysis).

See Home Page for details.

Since this is usually quite subtle, the public (90%) is still not paying any attention.

As prices continue to climb, the TV talking heads are starting to perk up and the public is starting to cautiously pay more attention – and some are even beginning to buy into this developing Bull Market.

Eventually things get frenzied – everyone is buying and everyone is talking about a market that’s headed for the moon! 

Now FOMO (Fear Of Missing Out) starts with the trading public and friends are telling friends that if you don't buy such and such stock, you're going to "miss the boat" big time!

Now, we’ve entered the “glorious” Mark Up Phase (Stage 2), which is also known as a Bull Market.  

Now more and more people are buying and trading volume is increasing as prices are increasing - this is EXTREMELY important!   

Also, continued Institutional buying is helping to propel this bull move like "rocket fuel"!

This can be seen by massive, sustained buying volume.

Keep in mind, the Institutions / Smart Money are investing tens, many times hundreds of millions of dollars and must do their (continued) buying over days and more often, weeks during the bull market.  

The big trading institutions don't look at price patterns, moving averages, etc., like smaller retail traders do, but the "big boys" look for areas of liquidity to assist in getting their immense buy and sell orders filled.  

That's why they "hunt" for the retail traders' stop loss areas - simply to take their money, while at the same time, finding their much needed liquidity.

The market needs liquidity to maintain movement!

Some traders are very profitable simply trading these liquidity zones along with (in the direction of) the Professionals.

A frequently used liquidity "trap" (aka liquidity sweep) is when prices break below two equal lows, it triggers protective sell stops from previous buyers as well as lures other small traders into selling (short) thinking prices will continue downward.  

This creates lots of selling which gives the Professionals their buying opportunity (liquidity) from these lower prices - and then prices abruptly reverse and  shoot up higher, making the Professionals significant profits, while leaving the retail / small traders "holding-the-bag" with losses.

The same thing occurs at market tops, but everything stated above is reversed (for short selling).

These liquidity sweeps happen time and time again.

The bull market will move up in waves - impulsive / range expansion on the buy side and corrective / range contraction on the sell side - with corresponding volume.  

Learning to "ride these price waves" properly, is how the money is made consistently.  

It's as simple as learning a new language - the charts tell you all you need to know, once you become "fluent".

Learning to be "at-the-right-place" (price) - "at-the-right-time" (timing the trade entry & exit) is invaluable.

Of course, using an Advisory Service that does only this also helps.

One must understand that the media "hype" begins slowly and builds with time 

(during the bull market).  There is a lot of interest & money underlying the extent of the media "hype", depending on the specific situation / company or companies involved.

But here is the funny thing: 

No one had initially believed the rally! 

That's right, everyone had initially hated the stock. The fundamentals were bad, the outlook was negative, etc. But professional traders knew better. They had been accumulating shares since early in Stage 1, as well as all during the up move / bull market and are now are getting ready to dump those shares off on those getting in late (the 90% unsuspecting frenzied buying public).  

This sets up stage 3.

Finally, after the glorious advance of stage 2, the stock begins to trade sideways again and starts to "churn" (Distribution Stage). 

Novice traders are just now getting in! 

This stage is very similar to stage 1, however with much more price volatility & a much wider, sloppy sideways channel.

Distribution is selling the assets, which ideally should be accomplished without putting the price down against the market-maker’  / insider selling.   

This is the mirror image (again, symmetry) between Stage 1 Accumulation (professional buying) & Stage 3 Distribution (professional selling).

As this happens we begin the top of the bell curve, known as the Distribution Phase (Stage 3), where, as mentioned above, the professional 10% are quietly selling / distributing (unloading) their previously purchased shares to the unsuspecting public (90%).  

Buyers and sellers move into equilibrium again and the stock just drifts along, however with considerably more volatility than it did in Stage One.  Prices become choppy & volatile and usually move sideways in a wide, "sloppy" channel.   The diminishing buying by the big players is reflected in the lower buying volume.

With many years of study & experience, you are able to observe - in real time - the market change / transition from bullish - to sideways - to BEARISH - time and time again!  

Once the 20 period Moving Average begins to go from flat to downward sloping, that's when it's "game on!"

During the downtrend, of course, you will see numerous (low volume) price bounces / retracements - some violent - but then the sellers will step back in, causing prices to once again decline.

Once again, please refer to the chart example on the Home Page.

It's at this time that the ("insider") market participants see that price is currently far above (perceived) value and that price needs to move down (over time) in order to once again become "efficient", that is, that price & perceived value, once again, align. 

Then the Master Pattern manipulation begins once again - the smart money "shifts" prices up above the Fair Value Price Line, just to "shift" them down below the Fair Value Price Line (sometimes as few as two times, sometimes as many as ten times - the market just has to "play itself out").

This is called a multi-leg price expansion.

This very choppy price action traps the small, unaware retail traders (weak hands / "dumb money" ) on both the long and short side of the market.  

This is known as price expansion / price exploration.

This "micro" phase at the end of Stage 3 is referred to as "the Master Pattern".

The majority of retail traders never learn how it works - and that's why the 90% rule almost always applies:

-90% of small / retail traders lose 90% of their account(s) within 90 days of trading.

It is during this "whipsawing" event where most inexperienced traders are lured in to making money-losing mistake after money-losing mistake, until the Professionals / Market Makers have accumulated their best positions (above the Fair Value Price Line) and then (and only then) decide it is time for the market to begin its new trend (down trend in this particular case) in sincerity.

The Smart Money is ALWAYS selling above the fair value price line (before a down trend), that is, doing exactly the opposite of the dumb money.

This is how the markets function - and have always operated this way.

This distribution stage can last anywhere from several weeks to many months and is well known (by the professionals) to witness VERY volatile price action as shares trade hands from the strong handed sellers (10%) to the weak handed buyers (90% unsuspecting public).

Once again, now, the 10% (seasoned / consistent winning traders & investors) are quietly beginning to sell (Distribute) the shares they had purchased back at the beginning of Stage 1 as well as during this Stage 2 Bull Market, while reaping huge profits.  

Who, you might ask, has been  buying from them at the worst possible time???

You guessed it – the 90% of the (uninformed) frenzied buying public.  That’s right, now everyone in the public is buying as many shares as possible (usually exactly at the wrong time)!

Now FOMO (Fear Of Missing Out) is kicking into high gear with the trading public / small retail traders, who now simply can't buy enough of this stock (at close to the worst possible time)!

Friends are telling friends: "You've got to buy this stock - you'll be able to retire on it!!!".

Oh, how very mistaken they are.

Once the professionals have sold most of their holdings, a bear market starts because markets tend to fall without Institutional support. 

In addition, the 10% professional traders are now shorting shares to make profits on the future price decreases during Stage Four!

It is now ready to begin the next stage.

This is the dreaded downtrend for those that are long this stock. (Mark Down / Bear Stage). 

But, here is the funny thing: 

Nobody believes the downtrend! The fundamentals are probably still very good and everyone still loves this stock. 

They think the downtrend is just a "correction". Wrong! They hold and hold and hold, hoping it will reverse back up again. 

At this point, more and more people are beginning to sell their previously purchased stocks, bonds, commodities, currencies, etc., however the majority will hold on and hope and pray for prices to reverse upward once again.  

The bear market will move down in waves - impulsive / range expansion on the sell side and corrective / range contraction on the buy side - with corresponding volume. 

Learning to "ride these price waves" properly, is how the money is made consistently.   

It's as simple as learning a new language - the charts tell you all you need to know, once you become "fluent".

Learning to be "at-the-right-place" (price) - "at-the-right-time" (timing the trade entry & exit) is invaluable.

Of course, using an Advisory Service that does only this also helps. 

Also, continued Institutional selling is helping to propel this bear move like "rocket fuel"!

This can be seen by massive, sustained selling volume.

Keep in mind, the Institutions / Smart Money are now liquidating previously purchased positions and re-investing (in short positions) tens, many times hundreds of millions of dollars and must do their selling over days and sometimes, weeks during the bear market, although the climactic selling (massive fear of continued losses by the public) can occur quickly, as this fear dominates and late buyers "throw-in-the-towel" for big losses.

As far as the public (90%) is concerned, since fear is the stronger emotion than greed, markets typically fall (Stage 4) MUCH faster than they rise (Stage 2).

All of the financial talking heads are saying “grab these great bargains” as the prices continue to fall.  Those that listen to them, intensify their losses!

Most of these (90% unaware public) traders / investors probably bought at the end of Stage 2 or during Stage 3. 

Sorry, you lose. Checkmate!

Side Note #1:

If the stock is failing to make new high prices while the news is still very good - take the hint - you're probably in late Stage 3 or early Stage 4.

Side Note #2: 

As a trader (or investor), once you start trading on emotions, it's just easier to flush your money down the toilet!

A favorite quote from Al Rizzo:

"When a falling stock becomes a screaming buy because it cannot conceivably drop further, try to buy it thirty percent lower." 

Toward the end of the bear move, The  Professionals are buying from the panicked {selling} public in two ways:

-Buying to cover their previous short positions (once again, pocketing massive profits)

while at the same time, 

-Beginning to buy for the next future up move (the next cycle's Accumulation Stage 1)!

Once again, all of the Professional buying is done quietly & subtly as the panicked public provides excellent cover for the Professionals' future operations (of, once again,  buying low & selling high).

Eventually later (many times months and sometimes years later), market prices begin to stabilize (form a base) and we begin the Accumulation Phase (Stage 1) all over again, where the “smart money” (10% professional traders) are quietly accumulating (purchasing) their stocks (inventory).  

Many times, it takes a good deal of time as well as the transfer back & forth of money & market sentiment to "reset" the market, momentum & public perception, but the entire cycle almost always occurs repeatedly.

Important Note:

In a strong, longer term  uptrend, all 4 Stages can develop numerous times, but the bottoms (beginning of Stage 1 Accumulation) will occur at a higher price level

&

In a strong, longer term  downtrend, all 4 Stages can develop numerous times, but the tops (beginning of Stage 3 Distribution) will occur at a lower price level.

AGAIN, IT CANNOT BE EMPHASIZED ENOUGH THAT THIS CYCLE REPEATS TIME AND TIME AND TIME AGAIN!

Stock market stages occur in all time frames on every chart you look at. This could be a five minute chart of Microsoft or a weekly chart of the Dow or a monthly chart of the soybean market – it makes no difference!

Generally speaking:

You want to stay in cash when a stock (or the market itself) is chopping around in 

Stage One (Accumulation).  

A sideways or "efficient" market is risky to trade - buyers & sellers are pretty much in agreement regarding prices for the time being.

In Stage Two (Mark Up / Bull) you will want to be aggressively focusing on long positions (Call Option purchases).  

A trending  or "inefficient" market is where the money is made - the buyers are far outnumbering the sellers at this time.

In Stage Three (Distribution), you want to be in cash. 

A sideways or "efficient" market is risky to trade - buyers & sellers are pretty much in agreement regarding prices for the time being.

In Stage Four (Mark Down / Bear), you want to be aggressively focusing on short positions (Put Option purchases). 

A trending  or "inefficient" market is where the money is made - the sellers are far outnumbering the buyers at this time.

That's all there is to it:

Trading with the four stock market stages is comparatively simple when viewed properly!  

MOST OF THE “GUESSWORK” IS REMOVED AND YOU ARE FREE TO PROFITABLY TRADE WITH THE CURRENT TREND!

Two rules for investing/trading:

Rule number one : most things will prove to be cyclical

Rule number two : some of the greatest opportunities for
gain and loss come when other people forget rule number one 

-Howard Marks

The above information is meant to simply explain how to keep a trader  / investor on the proper side of the market - the "how to" as far as actually profitably executing, monitoring and exiting trades is where an experienced Advisory Service comes into the picture.

To trade profitably, once the set-up is apparent, action is taken quickly & decisively, otherwise the opportunity "slips" away.

Once again, it's important to remember, when it comes to the markets: 

"What you don't know could hurt you VERY much!"

...and as mentioned on the Home Page:

Anyone can buy a stock, etc., however it's the sitting on open profits and eventual 

selling of the profitable asset that absolutely is a "sub-art form" in itself.

In other words:

Focus on which stage the chart is indicating that the market is in
          (Stages 1, 2, 3 or 4) so that you can trade without Diversions
            from the financial news, etc.  

If you want to lose money in the markets, just listen to the "experts" on the financial news channels - they will all but guarantee that you will make poor investment choices over time.  

They have an agenda / paycheck to protect - believe us - they're not looking out for your financial well being!

You must be able to "cut-through-the-noise" and there is a lot of it - some deliberately designed to distract and confuse, some just occurring randomly - either way - you must avoid letting the "noise" influence your behavior / trading method.

Remember, the charts have NO AGENDA / ulterior motives: 

they simply show things as they truly are!

Important Note:
Never confuse simplicity with lack of sophistication.
 

Occam's razor: 

When presented with both a complex solution to a situation
and / or
a simple solution to a situation -

MOST OF THE TIME - THE SIMPLE SOLUTION IS THE ONE THAT WORKS BEST!!!

Simplicity in process {the trading process} has made {and will continue to make} phenomenal amounts of money in the markets from very simple decisions that experienced traders are willing to make.  

Do NOT fear uncertainty - embrace it, as it will always exist -
because by the time the trader is certain of something -
the price move / opportunity will have already slipped away!

One can gain a major "edge" from other traders' uncertainty - once you learn to spot that uncertainty.  

That is one of the big profit making acquired skills.

Many are looking for highly complex ways of interacting with the markets,
when most of the time it's only the simple ones that are going to work!

For related information:

Please visit the "Why Only 10% Succeed" Page

Risk Management is an essential component of Trading - 

for more details on this important subject:

Trader Screen Stock & Commodity Overview Report

 In Addition (regarding the very important subject of risk):

Asymmetric Leverage must always be employed.

Asymmetric Leverage is the attempt to profit from the potential upside of leveraged trading with very limited downside risk -- that's the key to trading longevity! 

For more information on Leveraged Trading:

Types-of-Risk

Over the years, so many have asked:

How do you know that analyzing the charts will continue to work 

year after year?

The Simple Answer:

Price Charts are a reflection of Human Nature / Mass Psychology:

The same market patterns will continue to be valid

as long as Human Nature remains the same - in other words FOREVER! 

Opening a Free Account is easy and fast.

We now will only consider accounts with $50,000 or more.  

Proof of brokerage account balance is required before the Trader Screen 

Letter of Agreement is sent.

You can use your current broker (a Level I options account status is necessary) or open a new account with any major brokerage house.

You get the timely buy & sell recommendations, execute the trade and send us your fill sheets - it's that EASY!

See: "How Trader Screen Operates" Section at the bottom of the Home Page.