Transcription
This content is for educational and entertainment purposes [music] only. It does not constitute investment advice.
These two setups are almost identical. Same structure, same kind of candle, but only one of these setups keeps pushing and the other one completely fails. And if you're using regular candlesticks, you literally cannot see a significant difference between these two moves because candlesticks don't actually show you buying or selling pressure.
Now, check this out. Here's those same two candles, but now they look a lot different. This candle's all green, and this candle's half red, half green. Now, watch what happens next. The half red candle completely fails and the all green candle keeps pushing. The failed move pushed into high selling pressure and the successful move did not. Even though price looks the same in both of these setups, the reality behind these two candles is completely different. And once you see that difference, you start seeing which moves are likely to fail and which ones are likely to succeed. Regular candlesticks don't show you this kind of volume pressure. So why are we still using them?
So I built a completely new charting method exclusively on Trading View to upgrade traditional candlesticks and show what's really happening beneath price. And in this video, I'm going to show you exactly how this new chart type works, how to read it, how to find opportunities with it, how to know real moves from fake moves, and best of all, how to get it for free.
I'm Kio, the Trading View Wizard, and that's me after Professional Photoshop. And before we can use this new chart type to start reading the markets and improving our decision makingaking, we first need to understand exactly how it works. Just like when we all first learned about traditional candlesticks. You guys know me as kind of a goofball, but we're going to turn things up a notch in this video and get pretty serious. Why? Because I firmly believe that this new chart type can fully replace candlesticks in the future. And once you learn how to read this chart, you start to see how reversals like this are building, how up moves like this are strong, and when they start to become weak, and how moves like this never had a chance in the first place.
Now, let's talk shop and learn about what's under the hood for this brand new charting type. This brand new charting type is called IQ candles. And let's compare them to traditional candlesticks. Traditional candlesticks show the open, high, low, and close. And if price closed higher than the open, the candlestick is green. And if price closed lower, the candlestick is red. Traditional candles show nothing about volume, order flow, intention. They strictly operate as a four-coordinate price point.
Now, IQ candles do the exact same thing, but IQ candles are colored differently. These candles are colored based on volume pressure, specifically the ratio of aggressive buys against aggressive sells. If the candle formed on more aggressive buys, then you'll see a predominantly green candle from the bottom up with a slight shade of red from the top down. If the candle formed on mostly aggressive sells, then you'll see a predominantly red candle from the top down with a slight shade of green from the bottom up. And if buying aggression and selling aggression are relatively even, then this candle type will be split in two, half red, half green.
Here's the most obvious use case. If price is trending upwards, we want candles to be mostly colored green. And if price is trending downwards, we want candles to be mostly colored red. But keep this important fact in mind. There can be a strong up move in the candle mostly red or there can be a strong down move in the candle mostly green. And there's a specific way to interpret this that I'll show you later.
This chart type can detect imbalances, absorption, and even dominance control. Understanding each of these three events is extremely important to reading the chart. So, let's go see what this is all about.
The first use case for this chart type is to confirm a trend is actually healthy and that buy aggression is actually dominant. There is a catch. It can get extremely noisy. But there is a fix. By enabling the use smoothing setting, IQ candles will focus on which side is more dominant over time, not just on a single candle. And here's exactly what that looks like. This entire breakout in postshock drift consists of predominantly green candles. This means buyer dominance was strong over time throughout this move. And once IQ candles flip red here, does the up move actually run into some trouble. But the single most important point on this chart is right here. Notice that during this healthy pullback, IQ candles didn't panic. And this chart type suggests that buyers are still dominant over time. Of course, it won't always be this picture perfect, but I still consider this a strong upgrade from what we see here with traditional candles.
Now, let's look at use case number two, which is absorption. Absorption can go pretty deep. But to put it simply, absorption is when one side is aggressively buying or selling, but price doesn't move the way it should. This means there's strong opposing interests stepping in and absorbing that pressure. And when that happens, it can mean that a move is weakening or even about to reverse. IQ candles show when absorption is potentially happening by displaying a boxed upper wick when buyers get absorbed or a boxed lower wick when sellers get absorbed. And we can see this exact event on my chart. Absorption was marked as two boxed upper wicks and after absorption was identified. Both moves quickly exhausted. Of course, it won't always happen like this. But these IQ candle wicks can give you good insight into whether a price move is starting to exhaust. This is an example of the boxed lower wick to show that sellers might be getting absorbed. And the outcome after this absorption happens is a much more realistic scenario than a picture perfect reversal.
Let's look at use case number three. Imbalance detection. An imbalance is when one side buyers or sellers is doing most of the work. Either buyers or sellers are clearly dominating activity. Now that doesn't mean price has to move in their favor. It just means there's strong pressure from one side. This technique is slightly more advanced. If you're just starting out, it's better to focus on use case one and two for now. On my chart is an example of an IQ candle imbalance candle. You can enable this feature in the settings and choose what color corresponds to which side is imbalanced. Now, look at my chart here. We have an imbalanced candle. How do I know? Because it's colored blue. And what this candle suggests is that in this depressed price area, buying activity during this time period strongly dominated selling activity. And in this specific example, price did start to drift upwards. Here we can see another example of an imbalance, but this time a sell-side imbalance that took place during this down move. This suggests in this time window selling aggression dominated.
Now finally one thing I want you to always watch out for. After a strong up move or down move just like this. If the candle immediately afterwards closes against this move and a large portion of that candle is the opposite color, we call this a ratio flip. I've noticed a lot of times when this happens, the strong move that came before it ends up exhausting.
And for our final use case, this is a new charting type that I made recently and I haven't fully explored it. And I would love to hear use cases that you guys come up with or experiences you have in the comments below. I can't possibly think of every single way to use this new chart type. So, what you guys come up with will be extremely helpful.
Now, it's time for everyone's second favorite part of the video where I show you how to get the free tool. And if you've made it this far, you're probably a longtime subscriber. And to that, I say hello, I'm Kio the Goofball. How are you guys doing? Sorry I had to be a little more serious this video, but I really like this tool. And on the last video, I asked you guys to leave a comment on the big order bubble indicator and you guys absolutely swarmed in. It put a huge smile on my face. Thank you so much.
Now, to get this free tool, we have to go through a secret ritual. Just click the indicators button on Trading View and type in IQ candles. Now, funny enough, I haven't actually released it yet, but by the time you see this video, it'll be there. And if you're following us on Trading View, you could have had access to this probably about two days before this video. If you guys want to like and comment on the indicator, again, feel free, but of course, that's not obligated. What you did with Big Order Bubbles really meant a lot.
If you're looking for a trading home, check out the Trading IQ Discord server. I see all you guys that join that put the little IQ badge brotherhood up. Trust me, I notice. And feel free to like, comment, and subscribe if you want to see more videos for indicators just like this as soon as I release them. That's going to be it for this video. Thank you so much for watching, guys. I will see you in the next one.