Congestion Zone Formula


This is a part of my Impedance Factor measuring support or resistance via Peaks, Valleys, and Congestion Zones. The formula for determining congestion zone strength is as follows:

At a given price, take the first bar back containing that price as 1. Any series of bars containing that price, broken or unbroken, would qualify as a Congestion Zone. Four additional bars behind the most recent occurrence, however far back that is, would make for 5 in a row or a strength of 5. If 2 bars are skipped before another one is reached, then you have 6 out of 8. The formula for determination of a broken or unbroken series is (Actual Matches / Total Bars) * Actual Matches. Six out of eight (6/8) would be .75 * 6 or a score of 4.5. It's a measure of density, and the chart can be scanned back however many bars desired to find a density ratio greater than the Thrust Factor of the pattern itself. Any move reaching a Congestion Zone greater than the Thrust Factor of the pattern that launched it would be exited MIT at that level.
This is part of an ongoing discussion that follows determination of the Thrust Factor of a completed pattern. It is used to help determine a profit objective or occasionally a Stop Loss point.

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