Why do prices rise slowly but fall quickly? Wyckoff's Three Principles Explained

Why do prices rise slowly but fall quickly?Use Wyckoff's three principles to explain this problem:supply and demand principleWhen prices rise, it's usually because demand exceeds supply. In many cases, the increase in demand is a slow process as investors gradually realize the value of the asset and start buying. However, when prices fall, it's usually because supply exceeds demand. In the case of panic selling, the increase in supply can be very rapid as investors rush to exit, fearing further losses. This dramatic increase in supply causes prices to fall rapidly.causationWyckoff's principle emphasizes the relationship between accumulation (cause) and trend (result) behind market behavior. The market rise usually requires a long period of accumulation phase, and the main force is to gradually build positions. This is a relatively slow process as these smart money look to buy without attracting widespread market attention. Conversely, market declines can often occur quickly, as panic and uncertainty force investors to act quickly, with this sentiment spreading far beyond the accumulation phase.Effort and resultsIn Wyckoff theory, effort is typically measured by volume, while results are measured by price movement. During an uptick, prices may still rise slowly even as trading volume increases because there is selling pressure (i.e. supply). This shows that even if there is a larger buying effort, the result (price increase) will take time to materialize due to the presence of supply. During a decline, a large selling effort tends to be quickly reflected in the price, as panic and uncertainty cause market participants to rush to sell, causing prices to fall more quickly and significantly than they rise.Price increases tend to be a demand-driven, long-term process of accumulation and gradual position building, while price decreases tend to occur more quickly due to sharp increases in supply, panic selling, and quick reactions from market participants.

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