Technical Analysis Explained: Market States or Types of Trading The market moves in definite steps , and the steps can be set apart and then studied, each by themselves. Furthermore , these steps follow each other in a regular sequence , and you can definte and analyze this sequence , by each piece . If the trading type can be understood that the market is manifesting at any given moment , we can find techniques and even tools that work the best for that particular kind of market activity . Furthermore , if you know the type of previous trading , the trading occuring now , and which is likely to follow , we'll have an advatnage over other traders. We will always be able to choose the best tools to use , and we'll be prepared for the future . This is often half the battle . Hard earned experience and a quality technical analysis explained course has taught us that the trading definitions must be crystal clear and without the slightest ambiguity , or the analysis done will quickly become without value . We need definitions that apply to all markets , at any time . These definitions need to be simple, as well as robust. Within the technical analysis explained series types of trading will be discussed in future articles, and we'll find that careful observations and simple definitions combined can lead us towards success. We will start with a simple overview , so that you can see how things will fit into the big picture as we proceed . Then we will start with our discussion of the market in a trend run . After looking at trends , we will see how the Drummond Geometry tools combined with time period analysis will enable us to find out where the origination of the trend will be, and where it is likely to terminate . We will also see how our monitoring tools , the envelope and the 11 zones , fit in with our growing collection of theory and practical observations . And finally we'll suggest some rules for trading that may provide some help as your own trading plan is developed. Let's get our start .... We divide all market activity into two major divisions : markets in congestion and trending markets . We can divide up congestion further into congestion entrance, congestion action, and congestion exit . We add trend reversal as a final market condition , making five "types of trading" in all . The definition of a trend is definitely attached to the close of the bar position visàvis the Pldot . No other element is part of the trend definition, although for various trends there is much to say about their characteristics . A trend is always defined by this rule : If on one side of the Pldot there are three closes , the market is in a trend . This rule is called the three close rule , and there is no kind of trend that can exist without this rule . This will NOT happen. The next topic in the series on Technical Analysis Explained Congestion Entrance will be the topic .
Author: Ted Hearne is a Forex and bond trader who has written extensively about trading and has coauthored a technical analysis explained course called "Drummond Geometry". His biography and further
information about his work can be found at the technical analysis explained website.