forms of navigation.

A GPS plotter which does all the work for us which is

nice and
easy, and the old fashioned way using a map, compass, time, tides and way
points. In
order to pass the exams and charter a yacht, you have to learn both. And the
reason
for this is very simple. If there is a loss of power on board, then you have to
be able
to navigate using a paper based chart. The same principle applies here.
We can define where we are by using volume and price visually from the
price
action on the chart. The pivots are simply there as a quick visual guide, to
help
identify these price combinations quickly and easily.
Returning to our example in Fig 11.11, we now have the floor defined by our
price
action and the ceiling defined by our pivot highs. We are now waiting for a
signal,
and it duly arrives in the form of a hanging man, one of the candles we have
not seen
in earlier examples, and suddenly the volume has jumped higher and is well
above
average. The market br kThendles we heaks lower and through the floor of
our
congestion phase with a wide spread down candle. We now know that, on
this
occasion, the price congestion phase has been developing into a trend
reversal, and is
not a continuation of the existing trend.
It is here that we would be looking to take a short position. The market
pauses and
reverses higher but the volume is falling, and in addition we see a second
hanging
man candle, suggesting more weakness in the market. We also have the
comfort of
knowing that above us we have one of our invisible barriers of price
congestion.
What was the floor of support, has now become the ceiling of price resistance
as the
market attempts to recover, and this is why congestion zones are so
significant to us
as traders. Not only do they spawn the trend reversals and breakouts, but they
also
give us our natural barriers of protection which have been created by the
market.
Where better to place any stop loss than on the opposite side of a congestion
region.
The resistance region holds, and the market sells off sharply with a beautiful
price
waterfall. However, as the bearish trend develops, so the volumes are falling
away,
and we know as VPA traders that this trend is not going too far. And sure
enough,
after seven hours of downwards movement, it bottoms out and moves
into….......another congestion phase at a different price level.
Ironically, here too, we have a phase which is once again marked by pivot
highs, but
no pivot lows. However, the volume and price action tell us exactly where we
are in
the price journey. We simply wait for the next phase to start, which it does,
several
hours later. Again, how do we know? Volume gives us the answer. The
breakout has