Trading congestion areas on futures, forex, and stocks can be deadly but not if you have the THD Trend Average True Range Stop indicator as it identifies the congestion areas and the range of the potential congestion area by placing a plus sign (average true range stop) and a gray dot (also known as the congestion dot) to identify the entire width of the congestion area. This enables traders to identify if the congestion range is large enough to take profits or to simply sit on the sidelines waiting for another trade.
Trading Congestion Areas on Futures Using the Trend ATR indicator for TradeStation, Multicharts and NinjaTrader
For example, this morning in the annual members room, the Dow Jones generated a long entry on the 45 minute chart (green arrow) at the congestion dot. The Trend ATR clearly defined the congestion area (which was o the upside) but since price was at the congestion dot and did not break through it, traders knew to short this area as price should have broken through the area on the second approach.
The Nasdaq did not give a long entry — instead only a short entry at the Average True Range Stop indicator was indicated on the Nasdaq futures.
And the S&P 500 gave a short signal as well at the congestion dot. In this case, you see that price managed to flip the ATR stop from red to blue. However, the Congestion Dot formed an area of resistance and price would more than likely go back at least to the blue plus sign on the chart.
The biggest moves today were at these areas of support and resistance. We knew in advance that the Dow would go up to at least 17550 — before the market even opened. We also knew not to take a long position on the Nasdaq because the power would be to the downside.