Distribution is a phase in market structure where smart money or institutional investors gradually sell or offload large positions at elevated prices before a significant markdown or price decline begins. In Wyckoff methodology, the distribution phase typically appears as a trading range at market tops, characterized by high-volume selling disguised within sideways price action. Recognizing distribution early can help traders avoid being caught on the wrong side of a major trend reversal.
Example
“After months of sideways trading near the highs, the Wyckoff analyst identified the range as a distribution phase and positioned short ahead of the expected markdown.”