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.

We’ll continue to take a look at congestion action trading in our series on technical analysis explained.

Until a new trend run occurs, congestion cannot be exited . With no new trend run, congestion occurs in the market. Congestion exit is defined as a trend run out of the confines as established by the preceding congestion action .

Let’s use emphasis that is a bit different and say this again .

We can say that congestion action does two things .

First of all, it creates original confines that are strong .

Second, it creates expanded confines that are strong.

It’s the congestion entrance bar by which the original confines are created, which happens to be the first bar of congestion action, and the second bar of action, which is the next bar , and the third bar if there is no trend run . The confines are determined by the lowest low and the highest high of these bars , as defined by dotted line and block level . These are congestion’s original confines.

We should point out here that in the third price bar of the congestion price , ends up doing one of two things. Price either:

1) Goes into a trend run, going into congestion exit and the reversal of a trend , since the third bar closing on the PL dot’s other side doesn’t confirm congestion action . The original confines then determine the congestion confines , as set out by the highest high and lowest low of the first two bars . OR…

2) Closes on the other side of the PL Dot , and thus continues congestion action . The confines of congestion in this case are determined by original congestion, as is set out by the lowest low and highest high of the very first three bars.

Now, what about expanded confines?

Congestion action can create something known as expanded confines by moving outside the original confines of congestion or any subsequent confines , as long as in the meantime there hasn’t been a trend run . When price moves outside the latest confines it redefines the confines of congestion . From that point on , then congestion exit will deal with this confines that is redefined instead of the original confines .

(We should note, of course , that there is an effect on price by the original confines, because any level or line is able to do so, but in most cases , the true confines can be built up through congestion action that is repetitive, without the appearance of a trend run .)

The confines can be expanded as long as no trend run occurs . Only when congestion is exited and price is in a trend run can we really say that the congestions final boundaries have been defined .

So for Drummond Geometry , technical analysis explained defines congestion in a clear and consistent manner , and gives us a framework that we can work with in identifying the confines of congestion under any circumstance .

In future articles in this technical analysis explained series we will talk about trade entries and exits in congestions . We will find it useful that we have established the clear definitions about congestion .