Naked forex trading strategies
- Written by News Company
It goes without saying that most traders love indicators due to the element of excitement when you come across a new shiny tool to tinker with on your charts. However, the truth is that we are all looking for a fictitious ‘holy grail indicator’ which can help remove the anxiety from trade decision making.
At some point in your quest to succeed in forex trading, you will get to a place where you want to learn how to trade without indicators. This will generally lead you down the path to price action trading. Price action trading is largely a methodology.
It is a skill of directly reading the naked candlesticks. Whether you have a forex trading account Australia or in Europe, this can be achieved In most cases, a price action trader bases his decisions mainly on what the price is doing at the moment, in comparison to what it has done in the past. Successfully trading without indicators involves a number of steps.
1. Read the market structure
One of the major setbacks in a trader’s decision-making process is usually the inability to read the market structure prior to pulling the trigger. It is vital to understand the market structure since it ideally turns you into a chart, as well as getting to know the ‘direction of the wind’. It is simply a ‘back to basics’ skill that many have lost touch with.
In as much as market structure is largely a basic technical analysis term, it is vital that you embed it into all decisions you make. Market structure is also referred to as the swing highs or lows.
2. Identify likely turning points
The next step you need to take in naked forex trading is to identify the likely turning points. After having read on a chart situation, you need to understand the direction you want to trade. In this regard, you need to locate the most likely place the price is going to turn around.
It is at this point that we step up our technical analysis and make use of things such as trend lines and horizontal levels. Other traders make use of additional turning points like pivot points, Fibonacci levels, as well as psychological price levels like ‘big round numbers’.
It is however vital to stick to the basics, where you build a case for a high quality, high probability trade. In this regard, you need to get logical, proven turning points on the chart. This can be also be executed by making use of simple but strong support and resistance analysis.
When using support and resistance analysis, prices are likely to retrace to the old support. You can then use it as new resistance and reverse. Additionally, the price may continue selling into major range support level, where prices may turn around, or ‘bounce off’.
3. Wait for a trade signal
The final section in the strategy is to wait till you locate a buy or sell signal from your trading system. In case you are trading naked price charts, it is most likely that this will form a candlestick reversal signal, or a breakout catalyst pattern.
In most cases, the common candlestick is the rejection candle. It is actually the best trigger signal for learning to trade without indicators. You need to understand that consolidation breakouts generally create explosives. This is possible in case the market offers up a signal to catch them.
Even though some traders do what is also known as ‘touch trading’, which is to blindly buy or sell the market without any signal, having a trade signal works in confirming the trade idea. Additionally, it works in giving you a better chance of working out.
Over and above, forex trading has never been an easy endeavor. However, trading without the use of indicators makes it quite straightforward. Some indicators are of much value, though in order to avail its benefits, it is vital to understand each of them fully.
