Accumulation Area – Definition

Cite this article as:"Accumulation Area – Definition," in The Business Professor, updated September 21, 2019, last accessed October 24, 2020,


Accumulation Area Definition

For investors in the stock market, an accumulation area is a significant indicator of the market state. This is a charting zone that investors analyze, it indicates a potential purchase opportunity for investors in the stock market. Investors make buying and selling decisions in the stock market using analysis of an accumulation area.

The accumulation of every stock market features sideways stock price movement and experienced investors leverage on this price motion by looking at the patterns of a stock to determine whether it is at a high point which is a good buying opportunity.

A Little More on What is an Accumulation Area

The accumulation area is a form of charting that presents sideways movement of stock prices in the market. It is characterized with stock patterns and movement of stock prices that is important when making investment decisions in the stock market. This area presents stock patterns that indicate whether a stock is selling at a high, low or equilibrium level. The goal of every investor is to make purchases in the accumulation area.

The sideways movement of stocks is also detected by analysing the accumulation area. Also, by analysing the accumulation area investors are able to detect fluctuations in the trading volume of stocks as well as the differences in stock price. In previous times, only professionals in the finance industry, brokers and finance personnel can analyse the accumulation area effectively, however, the availability of online tools and materials has given investors access to the chart and its analysis.

Understanding a market chart and movements of the chart is crucial to investors, it helps them decide the appropriate time to make sales to purchases. Failure to recognize and accurately interpret chart movements as to whether a stock is in the accumulation zone or the distribution zone can be fatal to investors.

Experienced and wise investors pay more attention to charts movement, especially as the economy moves in a particular direction. In most cases, accumulation area work better in periods of relative stability than instability.

Reference for “Accumulation Area” › Trading › Trading Strategy

Academics research on “Accumulation Area”

Current accounts and financial flows in the euro area, Hobza, A., & Zeugner, S. (2014). Current accounts and financial flows in the euro area. Journal of International Money and Finance, 48, 291-313. We construct a new database of bilateral financial flows among euro area countries and their major world partners and explore the role of financial links in the accumulation and then adjustment of current account imbalances in the euro area. The data show that the geography of financial flows can differ quite markedly from trade flow patterns and suggest that the nexus between surpluses in the ‘core’ with deficits in the periphery went along financial rather than trade interlinkages. In particular, the data document the dominant role of ‘core’ countries in financing the euro area periphery’s current account deficits before the financial crisis, both directly and through intermediating financial flows from outside of the euro area. Most of this financing took the form of debt instruments. Following the withdrawal of private financing from ‘core’ countries during the crisis, the ECB-mediated funding and other official flows helped the periphery to refinance its liabilities and smoothen the external adjustment.

Investor protection and corporate governance, La Porta, R., Lopez-de-Silanes, F., Shleifer, A., & Vishny, R. (2000). Investor protection and corporate governance. Journal of financial economics, 58(1-2), 3-27. Recent research has documented large differences among countries in ownership concentration in publicly traded firms, in the breadth and depth of capital markets, in dividend policies, and in the access of firms to external finance. A common element to the explanations of these differences is how well investors, both shareholders and creditors, are protected by law from expropriation by the managers and controlling shareholders of firms. We describe the differences in laws and the effectiveness of their enforcement across countries, discuss the possible origins of these differences, summarize their consequences, and assess potential strategies of corporate governance reform. We argue that the legal approach is a more fruitful way to understand corporate governance and its reform than the conventional distinction between bank-centered and market-centered financial systems.

Global imbalances and the accumulation of risk, Gros, D. (2009). Global imbalances and the accumulation of risk. In his latest Policy Brief, Daniel Gros gives a new angle on why the existence of current account ‘imbalances’ should provoke the greatest financial crisis in living history if the raison d’être of a financial system is to deal with imbalances (between savers and investors). He argues that one has to take into account the way current account deficits are financed and how flow imbalances accumulated into large stock disequilibria. In his view, the securitisation leading to the crisis was the product of a maturity mismatch between foreign savers seeking short-term assets and excess supply of long-term US mortgage debt.

Foreign debt versus domestic debt in the euro area, Gros, D. (2013). Foreign debt versus domestic debt in the euro area. Oxford Review of Economic Policy, 29(3), 502-517. The aftermath of the 2008 financial crisis has led to a sharp rise in public debt throughout the developed world. The problem is particularly acute within the euro area, where several governments needed financial assistance from the International Monetary Fund and the European Stability Mechanism. This paper argues that public debt poses much greater problems when it is owed to foreigners, i.e. when it constitutes foreign debt. This view implies that the key to overcoming the euro crisis is in the external adjustment, not the fiscal adjustment. Another implication is that in a crisis a strong fiscal adjustment is desirable, not because it can immediately reduce the public debt/GDP ratio, but because it reduces domestic absorption and thus reinforces the external adjustment.

Capital flows in the euro area, Lane, P. R. (2013). Capital flows in the euro area. We investigate the behaviour of gross capital flows and net capital flows for euro area member countries. We highlight the extraordinary boom-bust cycles in both gross flows and net flows since 2003. We also show that the reversal in net capital flows during the crisis has been very costly in terms of macroeconomic and financial outcomes for the high-deficit countries. Finally, we describe the reforms that can improve macro-financial stability across the euro area.

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