Charts allow you to see the boundaries of a consolidation or a congestion. While both occur in non- rending markets, consolidation is typically characterized by narrow, sideways price action with low variance and horizontal support and resistance. Congestion consists of more-volatile price action occurring within trendlines that are not necessarily horizontal.
Price direction can be defined by four stages, which reflect whether it is a buyers or sellers market. It shows the four stages of any market: 1) accumulation, 2) mark up, 3) distribution, and 4) mark down.
Any trading approach must begin with an understanding of which stage the market is in and how a market transitions from stage to stage. Only then can an entry be determined.
Momentum trades can be made only in the accumulation and distribution stages.
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