Markdown Phase

The fourth and final phase of the Wyckoff cycle in which price declines from the distribution range as supply consistently overwhelms demand, completing the cycle before a new accumulation begins.

Markdown is the inevitable consequence of completed distribution. With no large professional buyer supporting price, supply from latecomers who bought during the distribution phase overwhelms the available demand. Price breaks below the distribution range on expanding volume, confirming that the downtrend has begun. The decline typically accelerates as stop-losses are triggered and sentiment shifts from optimism to fear.

Within markdown, rallies are short-lived and weak — declining volume on up-moves and expanding volume on down-moves is the bearish mirror of healthy markup. These weak rallies are opportunities for short sellers rather than buying opportunities for longs. The longer a bear trend continues, the more sellers are exhausted and the more "cause" is being built for the next accumulation phase that will eventually end the decline.

Markdown ends with a Selling Climax — the same event that opens accumulation. At peak fear, sellers dump shares indiscriminately at any price, and professional buyers begin absorbing that supply. The Wyckoff cycle completes and begins again. Understanding that markdown always eventually produces accumulation conditions prevents the paralysis of permanent bearishness, while recognizing the early signs of markdown prevents the costly mistake of holding through a full distribution-to-markdown transition.

This definition is for informational and educational purposes only. Nothing on Finance Compass constitutes financial, investment, or trading advice. Always conduct your own research and consult a qualified professional before making financial decisions.