Everything You Need To Know About The Run-up Phase!
Whether you are a beginner or a pro-trader, identifying the right trading opportunities depends entirely on stock market phases.
One such phase in the stock market that traders like the most is the run-up phase. Sound knowledge of this phase helps traders make the best decisions for maximising profits and lowering risks.
Even in this phase, at one point, the price of a stock could be rising significantly when at some point, it could be falling – there is a consistent set of marked highs and lows on the chart.
Once the investor understands this stock market phase and its occurrence, the market will seem much more manageable.
Apart from the run-up phase, the market goes through three other phases: the accumulation phase, the distribution phase, and the rundown phase.
The run-up phase is marked as the best phase for making money, but if you are new to it, let’s understand how this phase works.
What is the run-up phase?
This phase in the stock market applies to an individual stock showing an upward movement, also called an uptrend.
However, an uptrend can also be applied to the market as a whole, rather than just a single stock. Such a market is also referred to as a bull market.
In this phase, the market moves higher, above the resistance level, thus giving higher returns.
Since this phase comes just after the accumulation phase, silent traders who have not invested in the accumulation phase buy stocks here.
As this period progresses, the majority of investors enter the market. The pricing and the uptrend charts start attracting more investors.
In short, the market direction gets clearer, and the investors show optimistic sentiment.
After the run-up phase comes the distribution phase, also known as the reversal stage. This reversal happens when the market valuations seem excessively high and overvalued.
What to do in the run-up phase?
To buy or not to buy is the question that remains constant in an investor’s mind in any market phase.
But when it comes to the run-up phase, it is the best time for traders to make huge money. The uptrend of prices is great for momentum traders.
Usually, any downward trend in this phase never affects trading strategies. Instead, it is viewed as an opportunity to buy more shares, also referred to as ‘buying the dip’.
This phase is also best for short-term or swing traders. Lastly, just as the run-up phase progresses, the market becomes volatile because the prices move slowly daily.
Remember that cycles/phases exist in every aspect of life, even trading. Each phase in the stock market cycle demands different trading strategies.
Understanding a crucial phase like the run-up phase gives traders a prudent approach to determining the right time to buy or sell – especially when the market is highly volatile.
Finally, if you have not started trading yet, and are looking forward to getting into it, open a free Demat account now!