Let’s continue our discussion of congestion action trading in our series on emini trading.
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 previous action of congestion .
Let’s use emphasis that is a bit different and say this again .
There are two things that we can say congestion action does .
First of all, it creates original confines that are strong .
Second, it creates expanded confines that are strong.
The congestion entrance bar creates the original confines , which is the congestion action’s first bar , and the next bar, which is 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 defined by dotted line and block level . These are the congestion original confines .
Here is should be brought to your attention that the third bar of congestion, price , can do a couple things . Price either:
1) Enters into a trend run, and thus into congestion exit, and trend reversal , since congestion action is not confirmed by the third bar closing on the other side of the PL Dot . 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 occurs on the PL dot’s other side , and there is a continuation of 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.
Then there is expanded confines.
Congestion action can create something known as expanded confines by moving out of any confines of congestion like 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 , then congestion exit will deal with this confines that is redefined instead of the original confines .
( You should definite note, that price can be affected by the original confines , since any level or line can do this , but most of the time, the true confines can be built up through congestion action that is repetitive, without a trend run showing up.)
As long as there is no trend run, the confines can be expanded . Only when price moves into a trend run and exits congestion can we really say that the congestions final boundaries have been defined .
If you look at Drummond Geometry, emini trading defines congestion in a clear and consistent manner , and provides us with guidelines to help us identify under all circumstances the confines of congestion .
In future articles in this technical analysis explained series we will talk about trade entries and exits in congestions . These clear congestion definitions will definitely become useful .
