How to use Charts

How to interpret the charts

On Mondays the chart labelled Chart is long-term, the rest of the week it's more short-term, based on half hour bars, which are sometimes combined. The coloured rectangles represent the structures and the filled horizontal line the point of control. The skew is indicated by which side the midpoint the point of control lies, thus revealing either a 321 up or down (a 'P' shape or 'b' shape). The closer to the midpoint the more it approximates a 313 structure a 'D' shape.
A skewed structure, while still young, indicates probable continuation in that direction, while a more balanced 313 structure carries no real direction until the trading bracket is broken.
The more dated a skewed structure is the more likely it is to move toward a balanced 313 structure, negating any directional integrity.

The green ovals, or pillows on the side of the chart represent an approximation of the first standard deviation (STD dev) and what I commonly refer to as the trading bracket. The numbers, 321 and 313, refer to the standard deviation and therefore the type of distribution. A 321 up is 3rd STD dev on the bottom, a tail, then the 2nd STD dev followed by the 1st STD dev. In this case there is no STD dev extending higher and that lack of a tail indicates, 2nd and 3rd STD dev on the high side indicates the need for price to push higher in an effort to bring the distribution into a more normal structure. Of course if this can't happen over time then price is more likely to fold back on itself and create a normal distribution. This normal distribution often lacks the 2nd STD dev, thus creating a 313 structure. A fat bit with spike tails higher and lower.

The chart I call Profile is the latest, most relevant distribution, expressed in its finer detail. This is used to give the best reference to immediate support and resistance. If price lies within the bracket then there is a high probability that it will continue to rotate within that bracket. A move out side the bracket is advertising for the opposite activity and if it doesn't get it then we can say it is accepting the new price area and therefore likely to continue until it finds players prepared to counter the short-term direction.

If you would like to discuss any of the concepts presented here or if you have any questions, points you'd like clarified, please contact me