Congestion

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DEFINITION of 'Congestion'

1. A market situation whereby the demand of contract holders wishing to exit their existing positions exceeds the supply of willing participants wishing to enter into the offsetting position.

2. A period of time when a stock trades either below resistance or above support, or both.

BREAKING DOWN 'Congestion'

1. During times of congestion, contract holders, since their positions are unattractive to new investors and in order to offset their positions, will be required either to pay a high premium or sell at a low discount.

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