Detecting Accumulation

[Nowler]

Hey fine folks!

As the title says...
How does one identify when accumulation is taking place?

 

[Trader333]

Observing trade volume patterns (where this is possible) is a good start.

 

[Nowler]

Observing trade volume patterns (where this is possible) is a good start.

Thanks for the input, sir!
Do you, or anyone else know of some good material I can watch/listen/read to better able to identify this?

Any rules of thumb perhaps?

 

[Nowler]

I guess a specific question I have in regards to accumulation is, how to discern which direction those big players are accumulating for?

What are the telltale signs?

 

[Peacefull Warrior]

Look for the classic Wyckoffian atrributes: SC, BC, AR, and ST's (UT's and SP's) JAC, FTI etc. The most important aspect when labelling accumulation or distribution is too understand context, primarily the amount of cause built (energy) for the proceeding move, the effect (breakout). The tell tale signs are above, for a detailed approach look towards the swings within the accumulation trading range; rallies should increase in volume and reactions should decrease, higher levels of support are often made towards the end of accumulation indicating aggressive buying as the buyers are unwilling to give ground. Shakeouts are excellent signs along with bag holding.

 

[Nowler]

Thank you very much.
I will put some focus into Wyckoff strategy.

I came across Wyckoff uptrusts early in my trading. Forgot all about him then

 

[Nowler]

I've got some questions.

Is the Wyckoff method effective in FX, or more suited to the equity and bond markets? And is there a more appropriate timeframe for using it?

Edit: Also, if anyone has any quality video material on Wyckoff strategy then I'd be very grateful

 

[Peacefull Warrior]

As requested.

F

 

[wallstreetwarrior87]

Hi Nowler, may sound like a daft question, but I promise it is not -

What in your opinion is accumulation? Don't ask anyone else, just create your own theory based on what you think it is.

Then, you need to ask "WHO" is accumulating. "WHY" they are accumulating. "WHAT" happens when they are accumulating. Then you can try to make this information beneficial somehow.

But like I said, first of all, start off with your definition of accumulation. Not as easy as folks make it out to be!

 

[Nowler]

Hi Nowler, may sound like a daft question, but I promise it is not -

What in your opinion is accumulation? Don't ask anyone else, just create your own theory based on what you think it is.

Then, you need to ask "WHO" is accumulating. "WHY" they are accumulating. "WHAT" happens when they are accumulating. Then you can try to make this information beneficial somehow.

But like I said, first of all, start off with your definition of accumulation. Not as easy as folks make it out to be!

Hello Sir!

Not sure if you actually want me to answer these here...but... I've nothing better to do at the moment so, I'll go for it. Forgive me if some of these are stupid answers.

- My opinion of what accumulation is:
Answer: It's accumulating a position bit by bit, over time.

- Who is accumulating:
Answer: Those with quite large sums of money are the ones accumulating.

- Why are they accumulating:
Answer: Its a stealthier way of getting money into the market without tipping everyone off, and thus the market taking off before you have finished building your position. If people knew a massive position was coming in, then they would be willing to pay more for the stock, bond or whatever. Therefore giving worse and worse value to the investor as price rises.

- What happens when they are accumulating:
Answer: They are building their position while price trades in a range.

That's my basic understanding of it. But id love any help in understanding it better.

 

[malaguti]

Hello Sir!

Not sure if you actually want me to answer these here...but... I've nothing better to do at the moment so, I'll go for it. Forgive me if some of these are stupid answers.

- My opinion of what accumulation is:
Answer: It's accumulating a position bit by bit, over time.

- Who is accumulating:
Answer: Those with quite large sums of money are the ones accumulating.

- Why are they accumulating:
Answer: Its a stealthier way of getting money into the market without tipping everyone off, and thus the market taking off before you have finished building your position. If people knew a massive position was coming in, then they would be willing to pay more for the stock, bond or whatever. Therefore giving worse and worse value to the investor as price rises.

- What happens when they are accumulating:
Answer: They are building their position while price trades in a range.

That's my basic understanding of it. But id love any help in understanding it better.

If you pull up a chart of howdens HWDN.L
During a period of a year and still going, howdens bit by bit have been accumulating (buying back) their own shares.
That's what it looks like on a chart
Not sure if that helps at all

 

[malaguti]

If you pull up a chart of howdens HWDN.L
During a period of a year and still going, howdens bit by bit have been accumulating (buying back) their own shares.
That's what it looks like on a chart
Not sure if that helps at all

I'll answer a couple of other questions but the reasons why are often moot.
Why did they go through a period of buying back their own shares..
In short, because they had the cash to. Companies offer shares to raise this initial capital. But this is a huge debt to a company and with dividends this becomes a burden. If you have the money, reducing this burden makes sense. It's a mortgage to the likes of you and me. The dividends are our interest. So we pay it off if we have the money. A company is no different. It also has the effect of raising prices (not always of course) because the supply of those shares is now being reduced.
So that's the why..again pretty moot
You can track this as it's not a secret. Look at the number of shares being purchased over this period of time and the same broker was instructed to purchase more and more.
And you can see what it looks like on a chart and you said it yourself a period of consolidation somewhat arresting the reduction of prices. Notice however that price is now back to almost their all time high.
Now you know who, why etc
It's what it looks like is important. Why is pretty much irrelevant. Who is even less important.
Again, make of it what you will

 

[Nowler]

@ Malaguti

Cheers for that buddy.
I am not at all used to my share dealing platform yet - as the only actual trading I do is FX with a spread bet broker on their own platform - so I am not sure how to use the tools of my shares broker's platform. Particularly where the volume indicator is I'll start familiarizing myself with it from now on to get more benefit from my stocks research/analysis.

I am somewhat familiar with the buying back of shares, but when I think of accumulation, I generally think of an institution or fund doing it to profit from a big trade. Though, through my reading I've come across companies buying back shares for 2 general reasons. 1)Buying back to increase the price of their stock in an attempt to fool potential buyers that the company is better than it is. Or 2) Buying back so that there is less supply of shares, and therefore increasing the value of existing shares and thus better dividends to shareholders.

When I think of accumulation, I think of someone like Buffet who sees great promise in a particular company. Because of the sheer size of positions a man with his money can take, he wants to get all he is allocating to that position in at the best possible price. He can't just frantically start buying up all available shares, he needs to mask his intent until he has finished accumulating. Otherwise he risks price dramatically increasing, reducing the value in such a position. So he buys in an organised fashion... buying towards the lows of the range and when it fakes out at the bottom, and reducing his buying when it gets toward the top of the range. Rinse and repeat.

The Wyckoff method is making more sense to me with every passing day, but my understanding is still in its infancy really.

 

[Dowser]

Nowler, have you read THE classic: 'Reminiscences of a Stock Operator', there's plenty about accumulation in there...

 

[Nowler]

Nowler, have you read THE classic: 'Reminiscences of a Stock Operator', there's plenty about accumulation in there...

Hello cbrads my friend!

You know what!
I actually bought it, but it's gathering dust... somewhere

A nice day to sit out and read too.

EDIT:
I've just rooted it out of hibernation.
I also found my Playbook that I started to compile but then forgot about.
What a day this is shaping up to be!... all I need now is either Son or Moura to score first and Liverpool to win 3-2, or Son to score first and Spurs to win 3-2

 

[Dowser]

Hello cbrads my friend!

You know what!
I actually bought it, but it's gathering dust... somewhere

A nice day to sit out and read too.

EDIT:
I've just rooted it out of hibernation.
I also found my Playbook that I started to compile but then forgot about.
What a day this is shaping up to be!... all I need now is either Son or Moura to score first and Liverpool to win 3-2, or Son to score first and Spurs to win 3-2

You'll get more out of the book now having been around the block a bit, than you would of a year or so back - so all good. It's quite an entertaining read and certainly not written in the usual dry style of most trading books!

Was trying to think of something clever to say about Liverpool but I fooking hate football, so I won't bother!

 

[wallstreetwarrior87]

@ Malaguti

When I think of accumulation, I think of someone like Buffet who sees great promise in a particular company. Because of the sheer size of positions a man with his money can take, he wants to get all he is allocating to that position in at the best possible price. He can't just frantically start buying up all available shares, he needs to mask his intent until he has finished accumulating. Otherwise he risks price dramatically increasing, reducing the value in such a position. So he buys in an organised fashion... buying towards the lows of the range and when it fakes out at the bottom, and reducing his buying when it gets toward the top of the range. Rinse and repeat.

The Wyckoff method is making more sense to me with every passing day, but my understanding is still in its infancy really.

Some gold dust in there Nowler!!!! So you now see how you are starting to make the definition your own??

Accumulation = a form of intent. So market direction means nothing without a grasp on intent - nice one!

If you have accumulation, you then ultimately need ************ = distribution. To help you gauge distribution you do need at least a baseline of who is doing what and why, if you dont, then you can never really make a call on the form/type of distribution a market is likely to make. All depends on how accurate you want to be. Granted, you dont NEED to know to yield a profit, but to max out a move and not come out too early, you need a bit more information to work with, then you can stay in a market and not get shaken out, as you will have a high level of comprehension as to what form of distribution is needed to take place, to reflect the accumulation you have noticed/spotted/worked out. Ie you stay in the move as you have yet to see the distribution that is needed!

This then leads to time and volume - and more questions and work needed.

That's why it is beneficial to know the type of players you are viewing, as ultimately you need to reflect time and volume to them.

 

[Nowler]

Some gold dust in there Nowler!!!! So you now see how you are starting to make the definition your own??

Accumulation = a form of intent. So market direction means nothing without a grasp on intent - nice one!

If you have accumulation, you then ultimately need ************ = distribution. To help you gauge distribution you do need at least a baseline of who is doing what and why, if you dont, then you can never really make a call on the form/type of distribution a market is likely to make. All depends on how accurate you want to be. Granted, you dont NEED to know to yield a profit, but to max out a move and not come out too early, you need a bit more information to work with, then you can stay in a market and not get shaken out, as you will have a high level of comprehension as to what form of distribution is needed to take place, to reflect the accumulation you have noticed/spotted/worked out. Ie you stay in the move as you have yet to see the distribution that is needed!

This then leads to time and volume - and more questions and work needed.

That's why it is beneficial to know the type of players you are viewing, as ultimately you need to reflect time and volume to them.

I see...
Thank you

I love it when things start coming together!
I'm still a ways off, but i'm motivated to keep moving forward.

In order to help build my understanding, I've started following someone who's active on Twitter, who trades this way and gives a breakdown of whats happening. The intent here is to at the very least learn the language. Like with anything, it's easier to comprehend the content when you are fluent in the language.

I'll try come up with my definition of distribution shortly, and then build on that (and my definition of accumulation) over time. But first, I've got a delicious Thai green curry simmering and it's calling my name

When i'm buzzing off the endorphins after eating that, I'll get to work on defining distribution and watching/reading some related material.

If you, or anyone has any educational material for this sort of stuff, then I will take your hand and all
I prefer videos, but will happily take reading material.

I really appreciate the help you've given me, sir!
Thank you

 

[Nowler]

You'll get more out of the book now having been around the block a bit, than you would of a year or so back - so all good. It's quite an entertaining read and certainly not written in the usual dry style of most trading books!

Was trying to think of something clever to say about Liverpool but I fooking hate football, so I won't bother!

Indeed.
I look forward to re-listening/reading the books I read last year, so see what I didn't pick up on.

RE: Footie
I'm a Man U fan, so I hope Spurs win.
Liverpool fans all stink of wee

 

[Dowser]

Indeed.
I look forward to re-listening/reading the books I read last year, so see what I didn't pick up on.

RE: Footie
I'm a Man U fan, so I hope Spurs win.
Liverpool fans all stink of wee

Let's be honest, all Mickey Mousers stink a bit...