When I read a “head” of a jazz tune, or if I am reading a transcription of a solo, there is really no substitute for reading and knowing note names, and knowing them on the staff and knowing where the corresponding note is on the guitar neck, to facilitate this purpose.
For improvising, where the chords change quickly and modulations occur, or cycles of ii-V=I’s which go through different keys, knowing note names is not as important. In those situations, relative thinking is better for me, and involves interval recognition by ear. I can be in a scale pattern and know by ear which not to go to in the change.
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