How does Re-Distribution Work?

EnclaveFX Ltd
Jan 31, 2023

During a bear market, the redistribution phase occurs when the value of instruments (stocks, currencies, commodities, etc.) is refreshed before another downward trend begins.

This stage is characterized by a pause in a bearish trend and can occur more than once within a bear market. There is often a difficult time distinguishing between a redistribution stage and an accumulation stage.

In order to avoid incorrect conclusions, a meticulous analysis is crucial, which is why distinguishing between the two is one of the most challenging tasks for Wyckoff operators.

It is possible for professional traders who have already established short positions during a redistribution phase to sell at the top of the range and partially cover their positions near the bottom.

These traders are increasing their short positions gradually throughout the range's development.

They close some of their positions near the bottom of the range to provide support and not drive the price down prematurely. Redistribution remains volatile during and after its development before continuing the downward trend.

As a trend progresses, control over the value of stocks shifts from strong hands, such as professional traders, to less informed operators or weak hands. During this phase, the market must undergo a process of stock absorption, where strong hands regain control of the market because the supply has deteriorated.

In terms of duration, the distribution of weak and strong hands in control of value influences the duration of the redistribution phase. The duration of the redistribution phase will be shorter if strong hands still have a significant influence at the beginning. The main objective of redistribution is to add new selling positions. The main objective of redistribution is to increase the number of selling positions. If weak hands have a greater influence, it will take longer to redevelop the sales process.