Spotting congestion

[OpenMind]

In the past, I have suffered by entering trades when the instrument was in a congestion zone. Commissions and expenses almost killed me. Could anybody suggest an idiot-proof way to spot congestion early? I find it easy to spot them once they have occurred.

If this has been discussed before, I'd be grateful if you could point me to the right direction. I searched for the word congestion but got too many hits.

Many thanks.

 

[sjalmond]

In the past, I have suffered by entering trades when the instrument was in a congestion zone. Commissions and expenses almost killed me. Could anybody suggest an idiot-proof way to spot congestion early?

I've not got an answer to your problem: if the price has been going sideways for some time, I stay in cash and wait for the break-out. I try to not predict the future, but to trade what I see - and sideways markets aren't worth trading... yet.


Steve

 

[egro1egro]

Why don't you just take Joe Ross's "The Law of charts". Whith this in mind you can spot congestion with confidence on the 4th bar of it. It can be well before your moving average turns in the opposite direction to give you an entry or exit signal. In some cases you can anticipate a congestion on the 2nd bar even. If a doji is followed by a bar which doesn't break out of it - most likely this would turn into a congestion. Doji is usually followed by a continuation move straight away or grows into a congestion. Very rarely you get something different from these 2 possibilities.

Regards