Technical Analysis Explained - Trading Congestion Action Part I
Written by: deon.battig.technicalanalysistechnicalan
Date: Thu, 4 Mar 2010
We speak here of congestion action trading . A market in congestion action is one that swings back and forth between the confines of congestion, between resistance and support ( or between the block level and dotted line in the terms of Drummond Geometry ). This is action in the market that happens in congestion , and when there is not a trend run. The level that was created by the preceding up trend's highest high is what is referred to as the Dotted Line, or in a down trend, the lowest low . The first Block Level is the low of the first bar that closes on the opposite side of the PLdot in a uptrend , or the high of the first bar that closes on the other side of the PL Dot in a down trend .
Once you really have a good understanding of the patterns, characteristics, and theory of congestion action trading, it can be quite lucrative . It is much like crop harvesting . Congestion action trading can really earn bread and butter ....and what's more , you can buy the table to hold the bread , and a house for the table , and then an estate for the house , 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, congestion action trading holds a lot of potential for you , if you take time to learn everything you can about it .
Congestion action trading - what is it ?
One result of technical analysis explained in this way with Drummond Geometry is that you get definitions that are very clear. Price is either in a trend run or it is not . When after more than three closes are on the PLdots one side and then it closes on the PLdots other side, this is not a trend run . The market is in congestion if it is not in a trend run . Simple, and clear .
The first bar when there is a close on the trending dot's opposite side is the congestion entrance bar . Then, but definition, there is congestion in the market. We know when the market first enters congestion a dotted line as well as a block level get created. The block level is the congestion's first block level . This means, congestion action is the name for that market action which gets started with the congestion entrance bar and goes on for a time that is not defined until we see three closes on one side of the PLdot , showing the beginning of a new trend .
Let's take a look at how congestion limits are defined with technical analysis explained, as well as how expansion can occur .
Congestion action defines the parameters of congestion , which may be called the confines of congestion. Keep in mind that the confines of congestion are defined by the dotted line and the block level , and the congestion entrance bar is what establishes the first block level . There can be an expansion of these levels . If the price goes outside of the block level or dotted line , while still in congestion ( without three closes being on the PLdot's one side ), then price redefines the congestion confines 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 by following this link http://www.squidoo.com/technicalanalysisexplained
About the Author
Ted Hearne
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