Naked Forex Trading

catWelcome Traders!

Today’s article is going to be focused on Naked Forex Trading!

Naked? No not me, don’t worry! I mean the charts!

This means that the charts will have no indicators on them what so ever!

No indicators? As in zero? Yes 0. We will show you how everyone can trade Forex using no indicators so make sure to print out this article and ready it during the weekend!

The Crucial Trick

First of all, a question for YOU: do you use indicators? And if so which ones? And if not, tell us why? Please leave a note down below in the comment section! Thanks!

The crucial trick is: plain and simple price action and chart patterns.

Forex trading is not an easy endeavor but it can be straightforward.

Taking off the indicators and actually analyzing price action and chart patterns makes the trading process, Forex analysis and Forex trading a lot simpler.

Mind you that some indicators do have added value. But, of course, only if you have sufficient experience with that particular tool. What often happens to many newer traders is that they solely rely or try to rely on one or two indicators, or two dozens of them.

The problem with that is – in a way – the attitude: the hunt for the holy grail or the magic trade that will make all the correct decisions at the right time. Forget that utopia.

NO, I am not saying that you cannot use any Fibs, YES of course you can. Fibs are great. As we discussed last week in the article named “the Fibonacci Mystery: More Than Just Math.” I would not want to trade without them.

You can even use other tools as well.

But what I am saying is this: learn to read patterns and actually see the charts. Learn to read price action signals. If one focuses only on indicators, you will never see the obvious. Practice this art and you will see that Forex trading using no indicators works just as well. Or you will at least be able to reduce it to the basics such as Fibs, divergence and a moving average.

How to Become a Trader

To summarize a plan of action I recommend doing this: start to observe price action.

Minimize your indicators to a couple at max. Or nothing at all when doing this training.

Then look at the market. See it breath. Hear it talk. Feel it move. When a trader looks long enough at the charts, they start to build up intuition. I know it sounds very “zen” like. But if you like at the charts often enough, you will see the impulse in the market. You will see its behavior and get to know the currency’s character.

You will start to see energy and momentum in the charts.  The best traders observe small little clues that seem meaningless to others, but remind the chart watcher of imminent danger and opportunity. Or remind them of previous experiences that help aid the current analysis and decision making process.

The best traders are in rhythm with the market. The market makes impulses, corrections, then again impulse, correction, impulse, correction, etc. On and on. This is the heart beat of the market.

So if this pattern is the basic mechanism of the market, why not capitalize on it? The answer is: yes we should!

That is why learning to practice trading without any indicators is a good practice!

Forex trading using chart patterns and price action signals is tremendously powerful. There are a ton of links on price action at the Winners Edge Trading website so we will focus this article more on Forex trading with chart patterns.

Check out these links:

“Forex trading strategies”

“Why Japanese candle stick charts are so important to your trading arsenal”

“What are the most common Forex price patterns”

“The pinbar magic”

“Behind the Forex candles”

“The Bullish Morning Star Pattern”

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Chart patterns

Chart patterns are an awesome method of identifying great trades!

Why?

Patterns are so great simply because they mark the start and end of a correction. But also mark the start and end of an impulse! And the impulse is the gravy of Forex trading.

Impulses are great because Forex trader reach their profits and their take profit targets quickly without too much hassle and sideways chop.

And because impulses are more easily identified and caught in trends than in ranges, Forex traders usually to focus primarily on trading trends. And that makes sense. Trends have many price action areas with impulses. That is why trading with the trend is so important to Forex traders. But in fact trading with the impulse is the real name of the games.

We can use chart patterns for various reasons:

a)      To identify consolidation zones or corrective price action;

b)      To predict future movements;

c)       Most importantly to spot great Forex trading opportunities.

Chart patterns help us with identifying corrective periods. But they also aid Forex traders because we have clear boundaries when the chart pattern / corrective mode has ended and when most likely the impulse starts. That is why trading break outs are such a great, if not the best, method for Forex trading.

Read more vital information on that here:

1) “Trading break outs real or false”

2) “Simple Forex trading: impulsive moves

Anyhow, let’s talk about the patterns. There are tons of different chart patterns. Here is a list:

a)      Bear flag: bear flag break is a high likelihood upside continuation trade.

b)      Bull flag: bull flag break is a high likelihood upside continuation trade.

c)       Contracting wedge: space is getting smaller between 2 trend lines, continuation trade in same direction of trend.

d)      Expanding wedge: space is getting wider between 2 trend lines.

e)      Descending wedge: space is getting smaller between trend line and horizontal line, continuation trade to downside likely.

f)       Ascending wedge: space is getting smaller between trend line and horizontal line, continuation trade to upside likely.

g)      Triangle: space is getting smaller between 2 trend lines, continuation trade in same direction of trend.

h)      Pennant: space is getting smaller between 2 trend lines, continuation trade in same direction of trend.

i)        Head and shoulders: reversal pattern. Uptrend is weakening, potential downside.

j)        Inverse head and shoulders: reversal pattern. Down trend is weakening, potential upside.

k)      Rectangles: continuation trade in same direction of trend is likely.

l)        Flats, ranges, sideways zones: continuation trade in same direction of trend is likely.

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As you can see, there are tons of them. And just in case you didn’t know this: the market is communicating with you through these patterns! You just need to learn the language 🙂 and you will see tons of opportunities. On any time frame.

Examples

Lets give some real life practical examples of Forex trading with chart patterns!

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As you see in these charts, a Forex trader can accomplish a ton of analysis with just simple chart pattern recognition. Simple as that.

A triangle usually breaks in the same direction as the impulse prior to the triangle. So downside and then a triangle is usually follow by a continuation lower.

A (inverse) head and shoulders pattern is a reversal sign.

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Of course, it does take a trained eye to capitalize on them. That is why paper trading and back testing will always remain vital elements for the trader. We must practice, practice, practice… and then practice even more.

A Forex tool that you definitely want to your disposal is the ability to capitalize on Forex chart patterns. They happen so often and so regularly that you really want to make sure you are well equipped for that.

In the Live Trading Room of Winners Edge Trading, we are always on the lookout for break out trades!

If you feel that you need more guidance on trading break outs and trading chart patterns, don’t hesitate to look at our trading room where you can get the guidance you need with regard to entries, exits and take profits, trading psychology, risk & money management, etc. In our room we do use a couple of indicators, like Fibs. And you will see how we are able to identify break outs, and how we filter out bad setups.

Important

I am going to give you some home work! 🙂 I want everyone to come back here to this article during the weekend and post 1 chart with at least 3 different chart patterns! Boys and girls, we must practice to become excellent traders 🙂 Please take this exercise seriously.

 

See it this way: if you take this small step, then you have just proven that you are willing to do the work needed to become a Forex trader. I look forward to your posts!

Oh and don’t forget to let us know your answer to this question for YOU: do you use indicators? And if so which ones? And if not, tell us why? Please leave a note down below in the comment section! Thanks!

Hope you had a very successful trading week. In this Monday’s article on the upcoming Yen trend continuation. And also warned you about the AUDUSD fall on April 18 and many times about great GBPAUD long opportunities so hope you got some good pips this week!

Thanks again for reading, wish you an awesome weekend and Good Trading! Chris

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  • Good to see. I am big fan of naked of trading. I exclusively use trend channels and consolidation breakout with my strategy, along with major support or resistance which caused trend reversals in the past. Indicators are fine, but to be used effectively a trader really needs to understand the math behind it and how the indicator is made. If they don’t, they may not understand what type of false signals, or false positives the indicator can give. Therefore, using indicators can actually be more work! Once again, nothing against indicators, but being able to trade naked just off the charts is a skill I think every trader should develop 🙂

  • marsono

    good article, iam still a newbie on naked trading..

  • Hello Dave! Thank you for your comment! Much appreciated. I can imagine – many resources have been mentioned indeed. The Winners Edge Trading website just has a ton of great resources to learn from. It will definitely be worth your time to go through this section as well: http://winnersedgetrading.com/tutorials/. Glad you liked that post and wish you success with all the reading 🙂 Please dont hesitate if you have any questions! Chris

  • Dave Hanna

    Looks like lots of good resources here, Chris. Thanks. Now if I can just digest them all…