When you are doing a trade the question quickly comes out :  How and when do you leave without losing a cent ?   Aiming targets has to be one of the most important elements of your  trading strategy , and this is the subject of the next article in our series Technical Analysis Explained.

Objects can be found on time (I’ll keep doing the trade for three weeks ) or based on technically (I’ll stay in the trade until my slow moving average passes over my faster moving average)  or  profit-based (I’ll quit when I make the profit of 1000usd   ), or based on price (I’ll stop of the trade when it reaches my target price .)

Of the 3 methods each of them has some advantages and liabilities .  Technical exits are always available and remove this part of private judgment , however work well only in effective trends , cause deficit by congestion , and nearly always leave a number of money upon the table .  Found on time tools are helpful at times but just as often are net losers , and so shouldn’t be seriously taken as a solo tool .   Based on profit exits can train a trader to make frequent earnings but what happens when the trade continues far over your pre-planned exit point ?  This violates the simplest rule of trading: run after you win .

The best means of exiting is to decide aimed prices but only when these are heavily based in the market structure and point the market’s existing support and {resistance matrix}.  If your trade plan {takes into account} the natural support and opposition of the market then your target is going to be sound and the chances of yours of remove everything that the markets has is much more higher then with arbitrarily chosen, fixed-dollar profit targets (which attend to be emotionally driven )  or a technical moving average tool (which by definition is compelled to leave much money on the table ).

How do you aim profit targets according to market structure instead of an arbitrary dollar objectives?  For somebody it is not an easy question however for the trader who has created the understanding of multiple time period structure and the ability to project the support now and resistance levels forward into the future , directing targets is not hard to do . The basic skill is to {use your higher time-period support} and resistance levels ( this should commonly be one time-period higher than your trading time-period), and to set your target at the next logical support or resistance level beyond the current price.

Technical analysis explained as follows: Suppose you are day-trading the S&P E-mini contract.  You’re using a 5 minutes chart and take a position using your best entry tool . The market begins to move in your favor and enhance you have 5 contracts to put on a position you quickly accumulate a profit of 750usd.  You are glad and feel a bit greedy and that makes you want to get profits quickly , especially as you notice a slight retracement in the five minutes chart. But, well known the market structure is all the time at play, you step back for a moment and view the everyday and weekly charts. On your Drummond Geometry charts you can quickly see that your entry was close to everyday and weekly support , at the bottom of the daily envelope and close to the weekly envelope bottom too.  You can see that the logical target of this initial move is at the daily PLDot some 9 full points away, and that the improvement of the 5 minutes bar with its slight retracement is entirely normal and go on with the thought that the market has {further upside}. You set a price objective at the daily resistance and set an alert to sound when it is full filled , so that you are able to take profits here .  You can then further assess if the market will reverse and step back to the beginning support level or pause and keep going to higher level of resistance.

One of the main points is that when watching market structure as opposed to arbitrary dollar value price objectives you always control what the market is doing . As a technical analysis explained course teaches, full control taken by you enhance you know the structural aim at all times as the market moves between its higher time- period support and resistance levels.

Congestion action trading is the topic for today.  A market in congestion action is one that goes back and forth between congestion confines , between support as well as resistance (or, in Drummond Geometry terms, between the dotted line and the block level ). It is market action that occurs within congestion itself , and when no trend run is occurring . The Dotted Line is the level created by the highest high of the preceding up trend , or in a down trend, the lowest low . 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 very first bar on a down trend that closes on the other side of the PLdot.

After you have a working knowledge of congestion action trading theory, patterns, and characteristics , you can make a lot of money in this type of market . It is much like crop harvesting . Congestion action trading can be real bread-and-butter trading …. and even more, you can buy the table to hold the bread , and the house to hold the table , and for the house you can buy an estate, and a car, driver, plane, boat, and anything else you want . Basically , 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 effect of technical analysis explained with 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 all quite simple.

That first bar when price closes on the opposite side of the trending dot is the entrance bar of congestion . We can say that by definition the market is then in congestion . When congestion is first entered we know that a dotted line as well as a block level get created. The block level is the congestion’s first block level . Thus , the name for this market action is congestion action which gets started with the congestion entrance bar and goes on for a time that is not defined until on one side of the PLdot there are three closes, which is the start of another trend.

Let’s have a look at the limits of congestion and how they’re defined with technical analysis explained, and how they can expand .

Congestion action defines the parameters of congestion , which is also known as the confines of congestion .  You will remember 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 .  But these levels can be expanded . If the price goes outside of the block level or dotted line , while congestion is still in effect ( without three straight closes occurring on the one side of the PLdot), then price is redefining the confines of congestion and a larger congestion can occur. Before a new trend run occurs, this can happen various times.

We will continue this discussion about congestion trading in our next article in the technical analysis explained series.