What is Distribution in Markets?

What is Distribution?

Distribution is the phase where large investors sell into strength after an uptrend. Price often moves sideways with deteriorating breadth before breaking lower.

Distribution Clues

• Lower highs: Price struggles to set new peaks.
• Volume divergence: Declining volume on rallies, rising volume on down days.
• Sector rotation: Leadership shifts away from prior winners.
• Sentiment extremes: Widespread optimism even as price stalls.

Trading Distribution

• Fade rallies: Sell bounces into resistance with defined risk.
• Watch leading sectors: Weakness in key groups confirms distribution.
• Monitor breadth indicators: Fewer assets making new highs signals deterioration.
• Plan exit strategy: Decide in advance how you will react when support breaks.