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Advantages of Forex Naked Trading
Written by: PaxForex analytics dept - Friday, 01 June 2018 0 comments
Most forex traders rely on technical analysis books written for stock, futures, and option traders. However, long before computers and calculators, traders were trading naked. Naked trading is the simplest (and oldest) trading method. Traders who use standard technical indicators focus on the indicators. Traders using naked trading techniques focus on the price chart. Naked trading is a simple and superior way to trade and is suited to those traders looking to quickly achieve expertise with a trading method.
Forex trading is never an easy endeavor, however, trading without indicators does make it a bit straightforward. Some indicators hold additional value, but to avail its benefits, traders will need to get a thorough understanding of every one of them. A strategy is never a result of incorporating one single indicator. Merely going about it in that way will mean that an incomplete analysis of the market. To get ticks in all crucial boxes, traders need to gather a comprehensive understanding of all indicators which they indent to incorporate into their strategy.
In naked trading chart is clean, clear, and simple. It is easy to spot support and resistance levels as there is no confusing mess of lines, moving averages, and indicators drawn on the chart. It is a very practical way to focus attention on the bar-by-bar price action. To traders who are used to charts like this, the lines only add confusion and clutter that slows the reaction time and thought process
involved in trading. This chart uses the price action of the current candle relative to the historical candles as confirmation for taking a trade, which is probably a more pure form of trading.
Most traders are exposed to indicators like moving averages, MACD, Stochastic when they begin their trading journey. However, one thing to note is that indicators are mostly lagging by nature because they are dependent on price data on a chart. While lagging indicators can be useful to confirm trends or reversals, it is more beneficial for traders, especially when building a high probability trading plan, to understand leading indicators and how to combine them with lagging indicators. This is where studying price action on charts comes in.
It would not be appropriate to set rules about what should and shouldn't be on your chart. Rather than argue about what type of trader you are, it would be better to view yourself as a profitable trader, no matter the style. The ultimate goal in trading is to find what suits your eye and personality. After all, if you aren't comfortable looking at the chart, you probably won't be making the kind of decisions that will benefit you in the long run. Experiment a bit with a naked chart, see if it helps you focus on the price action or if it causes hesitation due to seeing nothing on your chart but price.