Technical Analysis Explained: What is Congestion Entrance by TechnicalAnalysisJim

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									Technical Analysis Explained: What is Congestion Entrance
Here's a look at the Technical Analysis Explained series where we speak of congestion entrance, a type of trading . We know that the market moves from trend to congestion and from congestion to trend , in a cycle that continues without ceasing , continuing to repeat forever. This has occurred as long as markets have been in existence and as long as there are markets, it will continue to happen. The only times this cycle isn't seen include times of regulation, constraint that is artificial, and intervention , such as things like price limits, price fixing, and market regulation - and even then the disruption is temporary . However, as long as demand and supply are able to vary, and as long as human beings come together in trade and act on their own perception of opportunity and value , markets will engage in trends and congestions . There are different names this can be called . Often the idea of equilibrium and disequilibrium are discussed, some speak of vertical moves and horizontal moves describing the way the chart moves across the page , some speak of distribution as a movement upwards and development being a sideways movement . It's all just the very same thing with different terms. A trend is a movement that can take you in a particular direction ; a congestion is a period on the market where it goes back and forth between resistance and support and moves across the page in a horizontal manner . We saw in earlier articles in our Technical Analysis Explained series that a trend has a clear definition this is a series that has three or more consecutive bars that end up closing on a particular side of the Pldot . Since a congestion is the opposite of a trend , the definition of congestions should also be simple , and it is . A market is in congestion when for three periods it doesn't close on one side of the Pldot . How could it be otherwise ? We talk about whether or not the market is in a trend , and we know what a trend is , so congestions are everything else . There is either a congestion or a trend in the market . Now congestion must be broke down into three different parts , as we define three types of congestion congestion exit, entrance, and action . But here, as an overview, let's just set down the definitions . Congestion entrance trading occurs after the market is in a trend with three consecutive closes on one side of the Pldot , but then the next bar closes on the opposite side of the Pldot . This bar , with its close on the opposite side of the PLdot than the previous three bars , is the first bar of a congestion , and after the trend, it's the first bar. Congestion action trading happens when the market goes back and forth , closing on one side or the other side of the Pldot as it moves forward bar by bar . We will talk about this in detail in the next article in our Technical Analysis Explained series. Congestion exit trading occurs when the market leaves congestion and is about to start a new trend . That makes sense, does it not? If the market violates congestion confines, either the dotted line or the most recent block level , then the market is manifesting congestion exit trading . Again, there is a lot, a very lot, to say about congestion exit trading , and it's an interesting topic too. But that is for another time and we won't deal with this further right now. Keep an eye open for articles on the topic later.

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 technical analysis explained website.


								
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