Trading Congestion Action - Technical Analysis Explained

Today we're going to talk about congestion action trading . A market that is in congestion action is a market that oscillates back and forth between the confines of congestion , between support and resistance ( or between the block level and dotted line in the terms of Drummond Geometry ). It is market action that occurs within congestion itself , and when there is not a trend run. The level that is created by the highest high of the up trend that preceded is the Dotted Line , or the very lowest low that the preceding down trend created. In an uptrend the first bar that closes on the PLdot's opposite side is known as the first Block Level, or the high of the first bar that closes on the other side of the PL Dot in a down trend .

After you have a working knowledge of the patterns, characteristics, and theory of congestion action trading, you can really make money. It is like harvesting a crop, or slaughtering the fatted calf . You can earn your bread and butter with congestion action trading....and what's more , a table to hold the bread can be bought, and a house for the table , and for the house you can buy an estate, and the car, the driver, and the boat, and the plane, and all the other toys or essentials you may or may not desire . Essentially, there is a lot of potential in congestion action trading , if you learn and apply all that is to learn about congestion action trading .

Congestion action trading - what is it ?

One outcome of technical analysis explained this way through Drummond Geometry is that you have clear definitions . Price is either in a trend run or it is not . It is not is a trend run when after three or more closes on one side of the PL Dot it closes on the other side of the PLdot . The market is in congestion if it is not in a trend run . It's very clear and simple .

When the price ends up closing on the other side of the trending dot, the first bar is known as the congestion entrance bar. Then it can be said that the market is in congestion by definition . When congestion is first entered we know that this creates a dotted line and a block level . The block level is the congestion's first block level . Thus , congestion action is what this market action is called which starts with a congestion entrance bar and continues for an indefinite period of time until we see three closes on one side of the PLdot , which is the start of another trend.

Now let's look at the way the limits of congestion are defined with technical analysis explained, and how they can expand .

Congestion action defines the parameters of congestion , which may be called the confines of congestion. You will remember the confines of congestion get defined by the block level and dotted line, and the congestion entrance bar is what establishes the first block level . But these levels can be expanded . If prices goes outside the dotted line, or outside of the block level , while still in congestion ( without three straight closes occurring on the one side of the PLdot), then price is redefining the confines of congestion and there can be established an even larger congestion . Before a new trend run occurs, this can happen various times.

This discussion of congestion trading will be continued in the technical analysis explained series.

Author:
Ted Hearne is a Forex and bond trader who has written extensively about trading and has co-authored a "technical analysis explained" course called "Drummond Geometry". His biography and further information about his work can be found at the www.drummondgeometry.com website.