Here's 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 continuous cycle, constantly going on over and over again . As long as the markets have been around, this has occurred and no doubt it will continue happening as long as markets are around . The only times this cycle isn't seen are in times of intervention, regulation, or artificial constraint , such as things like price limits, price fixing, and market regulation - and even then the disruption is temporary . As long as there is variation in supply and demand , and as long as people are coming 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. In some cases it's referred to as disequilibrium and equilibrium , still others speak of vertical and horizontal movement talking about the way the charts move , there are some that talk about the upward movement as distribution and development being a sideways movement . But it is all the same .

When things are moved in a direction progressively, this is a trend; congestions are market periods where the market oscillates between support and resistance and it's movement is horizontal on the pages.

In some of the previous articles in the Technical Analysis Explained series that we have a clear definition of what a trend is - it includes on one side of the Pldot, three bars that show up consecutively. 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 . Congestion occurs in the market when for three periods it doesn't close on one side of the Pldot . How could it be different ? We say the market is either in a trend or not , we already have the definition of a trend , so a congestion is basically 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 congestion in three different forms - congestion action, congestion entrance, and congestion exit. Here is a simple look at these 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 , closing on a different side of the Pldot than the other previous three, is known as the congestion's first bar, and the first bar after a trend .

Congestion action trading happens when the market goes back and forth , and as it goes forward, it closes on either one side of the Pldot or the other . We'll go into more detail on this in the next part of the Technical Analysis Explained series.

Congestion exit trading happens when the market is about ready to go into a new trend . That makes sense, does it not? And so if the market violates one of the confines of congestion , by the dotted line or even the block level, then the market is manifesting congestion exit trading . When it comes to congestion exit trading, there is a lot to say, and it is a most attractive topic . However, this is for another article and we won't go into more detail right here . Watch for more articles about this .

Technical Analysis Explained - How to Trade in a Trend

A good trend is loved by traders . Everybody wants one , one that's their own, and it's understandable , since a great deal of money can be harvested in a good trend .

How should you trade a trend? There are a variety of tactics you can use . Older traders sometimes say trends are pretty easy because any plan is workable. Because there is one direction to the prices, even if you enter with a poor trade position , it doesn't matter , since the trend will bail you out in the end . There is some truth in this old maxim , but trend trading can use some refinements as well .

One of the first things all market analysts learn is that technical analysis explained how trends can early on be recognized, and the trend as defined by Drummond Geometry , based on the Pldot and close relationship , lets us do that . More than likely you will recall that three closes on a side of the Pldot as a definition is the definition of a trend . You're in a trend after the third close .

There is importance to this because the best, the strongest, and the richest part of a trend is often in the beginning , when it first gets going . After you recognize a trend you need to stick with it as long as it is there. If possible , pyramiding should be added to the position , so your profit grows faster as the trend continues to develop .

Hanging on board with a trend is one of the best ways to make money in trading . If you have learned nothing else in your education , you should definitely that your style of technical analysis explained trend formation is one building block that is important for every trading system.

Sounds good , but how is entry to a trend timed ? And how is a trade manage in a market that is trending?

Of course trends are not all the same , there are slow ones and fast ones and some are young while others are old .

First we will consider the fresh new trend . There has been congestion in the market for awhile, perhaps for many days if you are a swing trader , or for some hours for day traders . The congestion and its parameters are very clear. Then suddenly there is a change in conditions , often driven by the news . The market begins moving in a direction quickly .

This is when you act fast. Get in the trends direction as fast as possible and then hang on . The exact point of entry is less critical than you jumping in. Your move will end up lasting for hours or even days so it's better to get in as soon as possible ! You can get into the trend when the parameters of congestion are broken or as the next bar goes up to the top of trading bands . If this is a trend that is new and real , for some time you probably won't see deep retracements !

This is a contrast to a trend that is mature and that has been around for some time. Is it possible to get on board? Yes, but if the energy of the trend is mature and losing punch, your entry techniques should be more cautious . In this situation you should be looking for a pause in the trend , at the very least a retracement of the price to the midline. Check on your higher time period to make sure there is sufficient potential left in the trade , enough that it is worth getting involved in a trend that is not fresh anymore.

If you are uncertain about these guidelines some time spent examining a chart will surely bring your understanding to a higher level . Most traders will benefit from taking a closer look at technical analysis explained in a good training course , as entry and exit skills are honed .

Next time we'll talk about entering and exiting congestions .