Advanced Charting Techniques for High Probability Trading: The Most Accurate And Predictive Charting Method Ever Created

CHAPTER 8

The Second Chart: Window 2—Chart 2

You have now learned how to interpret the dramatic upward or downward movement of M1 (white). You also know when to look at the lower chart indicators for additional confirmation and validation of the V when M1 (white) flattens out. It is now time to discuss the second chart.

Window 2 – Chart 2 provides a visual indication of strength. It also shows signs of the four phases of a cycle. This helps us in confirming when to enter a new position, 10-cent rule, or trailing stop, and how long to remain in these trades. Chart 2 also helps to stay in a tethered slingshot (TSS) by showing us the strength and momentum of any downward movement during the momentum phase before the cycle enters into the exhaustion phase.

■ Modified Candlestick

For the second chart, we use a modified candlestick chart rather than a line chart. The main difference between a standard candlestick chart and the modified candlestick is the value used to create each bar or candle. Instead of using the open-high-low-close (OHLC) bars like in a standard candlestick, in the modified candlestick chart we use a modified version that smoothes the chart, making it very easy to read. Therefore, the modified candle shows the relative strength of a cycle and also notes key turning points in price action, reacting much like a moving average (MA).

Standard candlestick charts remove the visual noise of the charts, but they are complicated technical indicators that are extremely difficult ...