Technical analysis in forex includes the use of indicators and other tools to analyze market trends. Different methods can be used by forex traders like technical analysis and fundamental analysis. However, a comprehensive method of conducting technical analysis includes the use of a naked chart which is also called naked trading. While indicators are very common, their major downside is that they are subjective. Trading without them can help you understand the market better. Here are three things you should know about naked trading.
1. What is Forex No Indicator Trading?
Forex trading without indicators is also known as naked forex trading. It includes buying and selling of assets. Price levels prevailing on the market are used as the main trading criteria. The current market conditions help the traders to decide when to enter the trade or exit. Unlike regular indicators, naked trading consists of different levels that help the traders to enter or exit from the trade markets. Naked trading consists of the following levels: Fibonacci, support, resistance, pivot points, and price levels. These different levels constitute the naked trading chart patterns that help to determine the market trends.
2. How to Read Naked Charts
Naked trading does not include the use of indicators, and the traders only use price levels and candlesticks as the trading triggers. A naked trading chart allows you to trade daily without focusing on any indicator. Naked chart trading mainly focuses on real-time trends rather than market indicators and other factors. If you want to trade effectively, you must understand chart reading, where you can see the current price in real-time. This type of trading is also known as price action trading when you use patterns like pin bars and candlesticks.
Without using indicators, you can make objective decisions using naked charts that strongly rely on market forces. The problem with indicators is that they can overwhelm the traders if they are cluttered on a single chart. A clear chart like a naked one makes trading efficient since your mind will be focused on one direction. Trading can be difficult, especially when you see several lines running in different directions on your screen. However, the good thing about naked charts is that they are simple to read and they also tell you about price movements. The indicators can help the traders identify reversals and trends, but they do not provide accurate information like naked charts.
3. Trading Without Indicators
In most cases, other traders end up messing with everything when they rely heavily on indicators. All you need to do is to understand the market structure if you want to trade effectively without using indicators. You must be able to study the momentum of the price movement in the market and identify direction. The market structure consists of swing-highs and lows that help traders to understand market direction. The high or low arrows will help you understand if the market is bullish or bearish. You will also be able to capture the necessary market trends that can help you make wise decisions when trading.
You need constant practice to gain better knowledge about identifying the swings. There are highs and lows, and these can be divided into four parts. For highs, they can be categorized into higher highs and higher lows, whereas lows can also be divided into higher lows and lower lows.
Higher highs that are followed by higher lows show an uptrend. On the other hand, persistent lower lows that are followed by lower highs indicate a downtrend. The other third option that does not consist of any set pattern of swings is called a consolidating trend. You can analyze these charts to get a trending market. When the higher highs and lows continue to show a bullish trend, you will get a buy signal. When the lowers and lows continue to depict a bearish trend, you get a sell signal since it indicates a bearish trend. When the price levels simultaneously at the same level, then it means that the prices are stagnant between these two levels.
As you can observe, naked trading does not include indicators, and there are many advantages of using this method. Naked charts are more reliable than subjective indicators. Naked charts also show current price actions, unlike indicators that may lag in terms of price actions. Several indicators on a chart usually confuse everything since they provide outdated information. A current naked chart provides comprehensive and historical data that help you analyze market trends and make an informed decision. Before you start trading forex, you must choose the right tools to use.