Naked Trading

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Advantages of Forex Naked Trading

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.

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How To Use Price Action In Your Trading

Last updated on February 10th, 2020

Naked trading is simply trading virtually “indicator-less” so you can see in real time what is going on with current price without it hiding behind a mess of indicators.

It is better known as price action trading where you may trade candlestick chart patterns or even singular patterns such as a pin bar. There is one particular naked trading pattern I like to use and that is what is called a failure test which looks to take advantage of traders trapped in an adverse position.

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Without the use of indicators some may say that naked chart trading is highly discretionary.

While there is some discretion is involved, you can set up a trading strategy that is rules based so you are not trading “patterns in clouds”. You will have actual variables you are looking for that should be contained in your trading plan.

Naked Trading Vs Indicators

If your first instinct is to check out an indicator on your chart for a trading decision, you are already a little late to the party since most indicators are a derivative of price.

This is not to say that indicators are worthless but should not be the main driver of your trading decisions. Trading indicators can add value in certain instances such as finding consolidations during a quick scan.

This chart shows two moving averages and during a scan, either programmed or visual, it can highlight us to a potential trading opportunity.

You could see the same thing with a naked chart but this is a fast and simple way to scan many instruments at once using a technical indicator. As a side note, notice the breakout from the consolidations which made for great trading opportunities.

Naked Chart Trade Example

Markets alternate between trending moves and price compression and there are opportunities to be had in both states of your market of choice.

  • When markets are trending, you have the opportunity for continuation moves or trend termination trading plays
  • Once the markets find a consolidation area, you now have the opportunity to play a support (resistance) holding or failing play.

Four types of trades and there are literally hundreds of ways you can take advantage of these trading opportunities.

In the chart below, there is a move we see time and time again because it is the nature of the markets.

What occurs here is during the markup phase, that big green candle attracts the eyes of traders who jump into the move. These traders are actually late to the party because more astute players are in the move prior to the break.

You will notice in the accumulation area, immediately prior to the break we have price sitting up against resistance in a two candle range. This is an opportunity for a trade where you think one of two things can happen:

  1. Resistance will hold and you play a short back into the consolidation
  2. Resistance will fail and price will rally to the upside.

While some traders will use a rate of change indicator or something else to show momentum, you can drop to lower time frames and see what the actual price on the chart is telling you.

These moves happen on every time frame and whether you day trade, swing trade, or look for position trades, these are viable “trading truths” that you can profit from.

Lower Time Frame Chart Structure

You can drop to lower time frames and see what type of structure is playing out in that time frame.

  • Is it more bullish indicating a higher probability of a resistance fail?
  • Is price starting to put in upper shadows and lower lows indicating that the bears have control?

We can also look at the current chart and gain a rough idea of how the lower time frame played out in the move just before the break out.

On the left side, we have a trading channel and at the bottom, we have what could be considered a failure test of the lows of the channel.

We would consider that a bullish sign in this context.

On the right side, I have drawn what I think the lower time frame would look like. Price has put in an bullish structure as well as an unconfirmed higher low and a double bottom.

Given the bias is to the long side, it is a worthwhile play to get a trade on prior to the potential break of resistance and mitigate risk with a protective stop. I did write about this type of entry in the the blog post about range trading.

While it is always possible to use multiple time frames in your trading approach, you can infer a lot from even a daily candlestick.

This example is a daily uptrend and we are in a strong momentum market condition. These can be difficult to enter at times because there is no pullback?

Or is there?

Understanding naked chart trading will require you to be able to infer lower time frame price action by the higher time frame candlestick. This is the sign of an accomplished price action trader where they can see the intra-day price movement inside the daily candlesticks.

In this example, price does pullback on lower time frames as indicated by the lower shadow of the candlestick. Of course we don’t know the exact route price took to close above the open but we do know price pulled back.

Placing an order near the market close or a buy stop slightly above the high is a high probability play:

  1. Market is moving with momentum
  2. Price did work off some of the strong move with a pullback
  3. The close of the candlestick indicates lower time frame breakout success

While you won’t buy the bottom if there was an obvious lower time frame reversal bar, your trading plan here was end of day trading to free up your days for other ventures.

Do Charts Show A Trading Exit

After price breaks out, break out traders and those waiting to see bull interest pile into the trade.

Is it overbought?

At this point it does not really matter.

Using just the naked chart, we have a level of resistance sitting above the current run in price.

This does not mean that price will fail to continue but it does mean we should be alert to what price does at this level. This applies to both support and resistance. These are areas you look for price action to show signs of what it is about to do.

Being on alert and having the ability to read the forming structure can give you a profit exit long before everyone else rushes to the exits.

Traders will pop on OS/OB indicators, momentum indicators or some other derivative of price but will fail to watch the price action unfold and what it will leave behind.

Key point: When I say price action, I am referring to the action of price but more importantly the structures it will leave behind.

After the big candle, we start to see some reversal candles setting up in the area of resistance. Notice the long shadows on those two candles with one being longer than the other.

Traders were still buying even though it was a resistance area and long top shadows were being printed on the candles.

Price fails and there is another push up towards resistance but you can see the structure that is printing does not point to bull strength.

After a period of sideways action, we see a final spike (the white box) into the resistance level and the bottom falls out. If those longs didn’t bail, they are in serious trouble.

Failed Expectations Can Show You The Way

There was no reason to hold on when it was obvious that the move was in trouble long before price broke to the downside.

“The elements of good trading are: (1) cutting losses, (2) cutting losses, and (3) cutting losses. If you can follow these three rules, you may have a chance.” – Ed Seykota

Once price broke into the top range, what would you expect to happen for an up move to continue?

What did we get?

Price ranged with higher bear interest than bull interest.

Is that conducive to a sustained up move? It isn’t.

That is not to say the second range could not resolve to the upside but we can only work with what we have at the present moment. We do not need a trading indicator to tell us what has and has not occurred at this level…..we can see it.

What does this give you?

It gives you a reason to exit your trade and depending on your trading personality, a chance for a trade in the opposite direction.

We know exactly where we would be wrong on a short so our stop is easy to place. You are selling pretty near the top of the up move and catching the move down from an advantageous place.

Naked Price And Structure

You can tell a lot more about the state of the market by simply looking at price and the structures that it plots by using a naked chart.

The Japanese candlesticks give you an “inside view” of who is doing what at each point in the chart. Understanding how the candles on your time frame plot on the lower time frame can give you insight into who is gaining the upper hand at most times.

Take a look through your charts and see where what you expect to happen, as shown in the above image, doesn’t and how you can capitalize on a higher probability trades and entries to pick up some profits.

Is trading naked the holy grail?

Some marketers will attempt to sell you their secret sauce but in reality, there isn’t one.

It’s also not the only way to trade.

In The End, Use What Works

There is nothing inherently wrong with trading indicators but it’s the use of indicators that is the problem. It’s the failure to understand what the indicator is telling you.

For example, I often use a variation of trading bands to help scan for overextended markets that may be ripe for support/resistance failing type of trades. It is also a precursor to a reversal trade.

I will use a momentum indicator to also make it easier to spot momentum that is decreasing or increasing. A trading setup will depend on the context we find ourselves in.

In the end, it will be the structure of price that you can see on a naked chart that will determine if a trade is going to be place and the indicator information is supporting the decision.

Trading With No Indicators…. or…….Naked Forex Trading

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! You can trade forex without indicators. We also have training for the ADX Indicator.

No indicators? As in zero? Yes 0. We will show you how to trade with no indicators using naked forex trading. Make sure to print out this article and be ready any time! We are sure you can find this simple forex trading strategy no indicators.

The Crucial Trick of Naked Forex Trading

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. Also, read The Benefits and Danger of Online Forex Trading.

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. Here is another article on forex trading advice and trade example.

How to Become a Trader

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

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

Then look at the market. See its 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 the 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 heartbeat 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.

Chart patterns

Chart patterns are an awesome method of identifying great trades!

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 reaches 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 breakouts are such a great, if not the best, the method for trading using no indicators.
Read more vital information on that here:
1) “Trading breakouts 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 the same direction of the trend.
d) Expanding Wedge: space is getting wider between 2 trend lines.
e) Descending Wedge: space is getting smaller between trendline and horizontal line, continuation trade to downside likely.
f) Ascending Wedge: space is getting smaller between trendline and horizontal line, continuation trade to upside likely.
g) Triangle: space is getting smaller between 2 trend lines, continuation trade in the same direction of the trend.
h) Pennant: space is getting smaller between 2 trend lines, continuation trade in the same direction of the trend.
i) Head and shoulders: reversal pattern. The uptrend is weakening, a potential downside.
j) Inverse head and shoulders: reversal pattern. The downtrend is weakening, potential upside.
k) Rectangles: continuation trade in the same direction of the trend is likely.
l) Flats, ranges, sideways zones: continuation trade in the same direction of the trend is likely.

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.

Let’s give some real-life practical examples of Forex trading with chart patterns!

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 followed by a continuation lower.

An (inverse) head and shoulders pattern are a reversal sign.

Of course, it does take a trained eye to capitalize on them. That is why paper trading and backtesting 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 breakout trades!

If you feel that you need more guidance on trading breakouts 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 breakouts, and how we filter out bad setups.

I am going to give you some homework! �� 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 becoming 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 practice naked forex trading/trading using no indicators? And if so which ones? And if not, tell us why? Please leave a note down below in the comment section!

Also, please give this topic a 5 star if you enjoyed it!

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Naked Trading

Good day traders, hope your Monday has been profitable! I’ve been reading a bit more on naked trading, or “indicator free” trading. I’ve really been drawn to the idea of trading with minimal amounts of indicators, and I’m beginning to see why you don’t need indicators. I am beginning to gather information from various professionals and forums about indicators, especially ones that claim to tell you the direction of the market with high accuracy, simply cloud your vision of the market. Just think of it as having a dirty windshield that’s hard to see what’s on the other side, dirt is the indicators, and the dirtier it is the less you can see of what’s really happening. Your windshield wipers are used to clean off your dirty windshield, so you can see clearly again, right? So wiping away the indicators can help you see what’s really happening in the markets. The charts you see in front of you serve as a window into the market, and I think its best to keep your window clean, or at least mostly clean.

I would recommend all new traders do, is learn some of the most beneficial basics in trading. Support/Resistance, order flow, Price Action (what is happening in front of you based on candlesticks, etc.) Now don’t think this is all you need to learn, its just what I think is good for a new trader to start with, because it will serve as your most valuable knowledge with anything to do with trading. This is due to the fact indicators and other advisors and such are designed on “price action”, the problem with them is they are always lagging, so by the time the indicator gives you a signal, its too late to enter usually. If you can learn Price Action without indicators, then you can identify a trade earlier, and feel better about your entries because you understand why. I believe price makes major moves because the institutions are dumping money in the markets to move price in a direction they desire, and they manipulate price to confuse the bulls and bears into thinking something will happen, so they can fill their (institutions) orders and make profits. The Forex market is a tricky place, full of very smart people, and they know how to prey on new inexperienced traders, and it happens every day right in front of you, you just have to learn how to see it. If you can learn how to see when the big guys make a move, then you can trade with them and profit how they profit, piggyback if you will. So, that’s it for my small lecture, dig deep in some of these topics, and you won’t be staring at the charts with no idea of what’s going on.

My first trade today was around lunch, and while I was on break I took a glimpse at the charts and found a setup that was about to trigger, so I got ready. It was with AUD/USD, and price was making a sharp move up, all the way to 1.04075. Around this area was resistance, as you can see by the pin bars and doji’s present. Shorty after, price was making a correction and returning back down towards the previous consolidation. Price reached the 20EMA and held, so I drew a line along the downtrend, and once price broke through my line, I placed a call. The line is to help me see that price is reversing, and I constantly update the position of this line to accommodate pullbacks and such, and the candle must close through the line before I enter. This trade was ITM. Remember the KISS method.

My second trade was with USD/CAD, and as you can see it was in a bit of a slight up trending channel, or it could be considered ranging. Anyways price was moving up I was waiting for a significant pullback to trade off of. Price reached some previous key levels and began to make a large bearish candle quickly, this is where I entered as it crossed through my line as it was returning back to the 20EMA. Price eventually returns to the 20EMA (rubberband strategy), and I use this in confluence with other psychological levels in the past to aid my trades. This trade was ITM.

My third trade was with EUR/USD, and price was in somewhat or a range on a high TF, so I looked back for key levels in the past, and waited for price to reach these levels. Price came up to some significant resistance levels in the past, so I waited for my trade to trigger here. I drew my line and waited for the break of it to enter a put. Since price was away from the 20EMA I knew it would return to it sooner or later, and at these key levels it seemed likely it would try it here. I entered a 5 min put here and it was ITM. My fourth trade was place shortly after the third, and I drew another line horizontally so if it broke though up, I would enter a call, but if it stayed below, I would place another put. I entered right after the doji before the large bear candle the second arrow is pointing to. This trade was ITM.

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