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

Now, what about expanded confines?

Well, congestion action can create expanded confines by moving outside the original confines of congestion or any subsequent confines, providing that there has been no trend run in the meantime. When price moves outside the latest confines it redefines the confines of congestion. From that point on, any congestion exit deals with this redefined confines, and not the original confines.

(We should note, of course, that the original confines can have an effect on price, 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 price moves into a trend run and exits congestion can we say for certain that the final boundaries of congestion 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 discussions in our technical analysis explained series we will talk about trade entries and exits in congestions. Traders love a good trend. Everybody wants one, for their very own, and understandably so, since a great deal of money can be harvested in a good trend.

But how do we trade a trend? Well, there are a number of tactics that one can use. (Some old traders say that trends are easy since any old trading plan will work. Because prices are always moving in one direction, even if you enter with a poor trade position, it makes no matter, since the trend will bail you out in the end. There is some truth in this old maxim, but nevertheless there are a lot of refinements that we can bring to trend trading.)

One of the first things all market analysts learn is that technical analysis explained how to recognize a trend as early in its existence as possible, and that one definition of the trend, based on the relationship between the close and the PLdot, lets us do that. You will recall perhaps that the definition is three closes on one side of the PLdot defines a trend. After the third close you are in a trend.

This is important because the best, the strongest, and the richest part of a trend is often the earliest part, when it first gets going. Then, once you recognize a trend the thing is to hang with it as long as it exists. If your trading situation permits, you want to add to your position by pyramiding, so that as the trend develops your profits also grow more rapidly.

Surely getting aboard a trend and hanging on tight is one of the best ways to make money in trading. If you have learned nothing else in your education, you should at least know that how your style of technical analysis explained trend formation is one of the basic building blocks of any trading system.

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