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This is a look at the Technical Analysis Explained series where we speak of congestion entrance, a type of trading .

Movements in the market occur from trend to congestion and back again, in a ceaseless, ever-continuing cycle ,repeating itself again and again and again forever . This has occurred as long as markets have been in existence and no doubt it will continue happening as long as markets are around . The only time that the cycle doesn't go on are in times where there is artificial constraint, regulation, or intervention, such as market regulation, price fixing, market suspensions, price limits, and more – and even then the disruption is temporary .  But as long as supply and demand can vary , and as long as human beings come together in trade ad they act on opportunity and value as they perceive it, trends and congestions will continue in the markets.

Various names can be used for this. Sometimes we have talked about equilibrium and disequilibrium , still others speak of vertical and horizontal movement describing chart movements, some talk about distribution being an up movement and the sideways movement as development . Really it's all the same thing .

Trends are moves that carry us progressively in one direction ; congestions are market periods where the market oscillates between support and resistance and moves across the page in a horizontal manner .

We saw in earlier articles in our Technical Analysis Explained series that there is a clear definition of a trend – this is a series that has three or more consecutive bars that end up closing on a particular side of the Pldot . Because a congestion is exactly opposite of a trend , we expect our definition of a congestion to be simple as well , and it really 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 . Markets are either in congestion, or they are in a trend.

There are three different lessons that are a part of congestion, as we define three types of congestion – congestion entrance, congestion action, and congestion exit . As a little overview, here's a look at their definitions.

Congestion entrance trading will occur after there is a trend in the market, with three or more closes in a row on the side of the Pldot, and then the next close occurs on the other 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 the first bar after a trend .

Congestion action trading occurs as the market swings 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 , the market is showing signs of congestion exit trading. When it comes to congestion exit trading, there is a lot to say, and the topic is interesting . But that is for another time and we won't deal with this further right now. Watch for more articles about this .

 

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