A market cycle describes how markets rise, overheat, fall, and eventually recover. Prices don’t move in straight lines. They move in phases driven by growth, expectations, fear, and reset.
Think of it as a loop rather than a timeline. Optimism builds, turns into excess, breaks under pressure, and slowly rebuilds. Most investors experience every phase, but few recognize where they are in the cycle.
Market cycles explain why the same strategy doesn’t work forever. What performs well in one phase can fail in another.
Understanding cycles helps investors manage risk, expectations, and time horizon. It also reduces emotional decisions driven by short-term market sentiment, especially near peaks and bottoms.
Market cycles are often identified through a mix of signals:
- Rising prices and expanding valuations during growth phases
- Extreme optimism, leverage, and crowded trades near cycle peaks
- Broad declines of ~20% or more during contraction phases
- Stabilization and gradual recovery as fear fades
No single indicator marks exact turning points.
A common mistake is assuming the current phase will last forever. Trends feel permanent until they suddenly aren’t.
Another error is trying to time exact tops or bottoms. Market cycles are easier to recognize in hindsight, which is why disciplined strategies outperform emotional reactions.
On Stoxcraft, market cycles are covered in Academy content explaining long-term market behavior and investor psychology.
They’re also referenced in market analysis linking bull markets, bear markets, and major market crashes into a broader cycle framework.