Let’s further discuss congestion action trading in the article series about stock trading course.
Congestion can’t be exited until a new trend run happens. Congestion occurs if there is no trend run . When a trend run occurs this is a congestion exit as established by the preceding congestion action .
Let’s use emphasis that is a bit different and say this again .
Congestion action can be said to do two different things.
One: It creates strong original confines .
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 very next bar known as the second bar of action, and the third bar if a trend run doesn’t occur. The confines are determined by the lowest low and the highest high of these bars , as block level and dotted line define them . 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) The close happens on the other side of the Pl dot, and there is a continuation of congestion action. In this case the confines of congestion are determined by the original congestion , as is set out by the lowest low and highest high of the very first three bars.
So, what about expanded confines?
Well, congestion action can create expanded confines by moving so it is outside of the original confines, providing that there has been no trend run in the meantime . When price leaves the latest confines, the confines of congestion are then redefined. From that point on , any congestion exit deals with this redefined confines, and not the original confines .
(We should note, of course , that price can be affected by the original confines , since any line or level can do so , but generally speaking , the true confines can be built through repetitive congestion action , without a trend run appearing .)
As long as there is no trend run, the confines can be expanded . Only when a trend run occurs and the price goes into a trend run can we say that there is a definition of the boundaries of congestion.
If you look at Drummond Geometry, stock trading course clearly and consistently defines congestion , 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 .