Price congestion area

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«An expert is a man who has made all the mistakes which can be made, in a narrow field.»
(Niels Bohr)


Markets has bullish, bearish and lateral trends. The sideways trend is generally well defined and may take the form of a graphic figure as, for example, a rectangle that represents the perfect form of laterality. Markets are in a congestion phase for most of the time, and as long as in these phases of congestion uncertainty is mostly expressed it is obvious that false signals abound as well as the losses of the traders who want to operate at all costs and at any time.

While all the side formations are considered price congested areas, not all the congested price areas are properly sideways formations, for example, the following graph:.


Area congestionata.jpg
A congestion area. Note the absence of a definite trend and a volatility that generates many false signals.


The lack of a clear direction, the decline in trading volumes and the many contradictory signals make every congestion area a danger to be avoided as much as possible. Sometimes the congestion areas evolve into a defined larger trading range, sometimes volatility increase, breaking continually supports and resistances and then soon enough re-enter in the congestion zone. Once a congestion area is Identified, a trader must carefully observe when it stabilizes, even by using higher timeframes which for these areas will appear as a sideways trend. There is only one thing to do in these cases, learn to stand still.

While waiting and during the change of technic situations, there are the best operational opportunities.

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