Traders Don’t Fail – They Quit

by | Dec 7, 2023

It’s been a very tough year for swing traders.

Go long the market drops. Go short the market rallies.

Don’t do anything and you save from the burn.

But in the bigger scheme of things, it looks like we are in an accumulation phase.

The accumulation phase is a period in which smart money (informed and experienced traders or institutional investors) is believed to be accumulating a particular asset while it is still relatively undervalued.

This phase occurs before a notable uptrend or bullish move in the market.

Key characteristics of the accumulation phase include:

Sideways Movement:

Prices move within a trading range, often forming a base or a consolidation pattern.
The range represents a period of equilibrium between buying and selling forces.

You can see the JSE ALSI has been in a tight range this entire year.

Decreasing Volume:

Volume tends to decline during the accumulation phase, indicating a decrease in overall market activity.

Lower volume signals that the asset is not attracting significant attention from the broader market.

There have not been huge orders on the JSE ALSI like other years. It could be because there are LESS investors buying shares and more going into derivatives and margin trading.

Or because they are worried about the state of the economy with load shedding, foreign direct investments pulling out, the country being rated down or people fleeing the country.


Smart Money Accumulation:

 

Informed traders or institutional investors quietly accumulate the asset during this phase.

Their accumulation is not typically evident in the overall market activity due to the relatively low volume.

Now with December, we could see investors piling into trades from their bonuses, offsetting taxes, preparing for the next year or with optimism with the festive season.

Transition to Markup Phase:

After a sufficient accumulation, there is an expectation that the asset’s price will break out of the trading range.

This breakout marks the end of the accumulation phase and the beginning of the markup phase, characterized by a sustained uptrend.

So, my hopes and bets are UP.

I think once we break out above the range, we could see the JSE ALSI rally a good 10 -20%.

But geez, we need strong catalysts to kick in.

Even if it’s international markets helping us run up with Dual LIsted companies or America’s leading influence.

WHat are your thoughts? You think we’ll get our long waited for rally?

Traders and investors who stay in the game will reap the rewards.

Patience is a traders virtue.

Impatience is the reason why traders quit. They don’t FAIL – THEY QUIT.

    Trade well, live free.

    Timon Rossolimos
    Founder, MATI Trader

     

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