The Outer Box Rules

Two boxes disagree. The monthly candle is bullish; the weekly candle inside it is bearish. Which one do you believe?

Most traders answer this with a rule they were taught — “always trade with the higher timeframe” — without being able to say why the rule is true. This chapter gives the reason, because a rule you understand is one you will still follow when the smaller chart is screaming at you to abandon it.

The reason is simple. The outer box contains more trading data. When two boxes disagree, the one built from more of the market is the one more likely to be right about where the market is going.