Naked Forex is the oldest and one of the simplest trading methods, where price is king, and trading is handled without complex indicators and technical analyses.
- We’ll walk you through the basics of Naked Forex; we’ll explain what it is and how naked forex uses high probability techniques for trading without indicators.
- We’ll also outline why learning to trade naked the old-school way will give you a better understanding of how the forex market works.
Whether or not you decide to pursue this style of trading, the knowledge that you’ll gain from learning it will be useful to any other forex trading strategy you use.
Naked forex, also known as price action trading, is a style of trading without the aid of indicators. Some traders advise using up to two indicators, but naked forex traders don’t use any.
In forex, traders commonly use indicators to measure the exchange rate, volume, and the open interest of a currency pair. Indicators help a trader establish entry or exit points on a trade. In naked forex trading, however, traders use techniques that focus on real-time information and price charts rather than on indicators.
While the pros and cons of naked forex trading are still hotly debated among the FX community, advocates argue that this method allows traders to be as close to the action as possible because it relies entirely on live prices.
A lot of traders even recommend that beginners learn the “naked forex trading without indicators method” first, to help them better understand the market, before moving on to trading with indicators.
What is naked forex?
So, what exactly is naked forex trading?
When you trade naked, you make decisions based on current market conditions rather than on past or future price movements. Naked forex trading relies on price action charts to understand what the market is doing and in which direction it will move. This simplified method allows trading decisions to be made more quickly and spontaneously.
Trading with indicators, on the other hand, involves analyzing large amounts of complicated data and patterns that might delay trading decisions and overwhelm less-experienced traders.
Trading without Indicators
Trading without indicators requires knowledge of the market and an understanding of how it works. Anyone wishing to try this style of trading needs to first learn how to read price action charts and thoroughly understand market trends and patterns.
Because naked forex trading decisions are based on current, rather than past or future events, naked traders also need to use an up-to-date forex economic calendar to be aware of the latest market-moving events.
How to Trade without Indicators
If naked forex trading doesn’t use indicators, how exactly is it done?
For one, naked trading involves understanding market cycles and trends. Learning price action to help determine which way the market is most likely going to move is crucial.
An integral part of learning to trade forex naked without the aid of indicators involves learning how to read charts and analyze the various candlestick patterns.
Understanding Market Cycles and Trends
A successful naked trader understands the movements of the forex market and that it works in cycles.
Market cycles tend to repeat themselves and a typical pattern consists of:
- Ranging lows
- Trending upwards – an uptrend is a series of higher highs and higher lows. These build a possible upward price direction
- Ranging highs
- Trending downwards – a downtrend is a series of lower highs and lower lows. These build a possible downward price direction
Being able to recognize market cycles and understand them helps naked forex traders to know whether a trade without indicators should be made and when. The key to recognizing this is to trade with the trends rather than against them.
The Benefits of Forex Trading Without Indicators
There are many benefits to naked forex trading without indicators. It can help traders practice their market reading skills. This can provide a better understanding of the market before moving on to more advanced techniques of trading and analyses.
Naked forex trading teaches the importance of checking price action first and indicators second. Indicators should only ever be used to confirm that it’s safe to make a trade and not used as a signal of what type of movement to take.
A clear benefit of naked forex trading without indicators is that the trading process becomes simplified because it’s easier to process real-time data. Trading forex naked eliminates the distractions of too many indicators, focusing instead on live price action. Trading decisions can be taken faster and are not delayed or paralyzed by overwhelming amounts of data.
The Potential Problems of Forex Trading Without Indicators
Naked forex trading without indicators requires intermediate trading experience. Some industry understanding is needed to be able to recognize real-time market movements and cycles.
If you’re used to trading with indicators, it may take some time to learn how to trade without them. Identifying price signals and learning to rely on chart patterns instead of indicators may take some time to master.
What are the key takeaways?
Naked forex trading without indicators could be a highly effective and easy-to-use method of trading for some people. It can speed up trading decisions because it’s carried out in real-time, without the need for complicated analyses of technical data.
Naked trading might be a good way to learn how to read markets, without the distractions of multiple indicators and complicated strategies. This will also save you time in making trading decisions.
However, don’t forget that it’s still important to understand indicators, even if you don’t use them in naked forex trading.
Frequently Asked Questions:
In 2012, Alex Nekritin (CEO and President of TradersChoiceFX, one of the largest forex introducing brokers in the world) and Walter Peters (full-time forex trader with a Ph.D. in psychology) wrote Naked Forex, a guide on how to trade naked, focusing on the simpler and more effective method of basing trading decisions on price charts rather than indicators. Their book aimed to debunk the three myths of successful trading. They argued that most traders believe that to be successful, their trading must be indicator-based, complex, and dependent on the trading system.
Naked Forex is a guide to trading the old-school way, relying on real-time information, and without the need for complex technical analyses and indicators.
Naked trading is not for everyone, but it’s still worthwhile trying it. The act of looking at price action first and indicators second is a useful training exercise for any trader. Naked trading might be a good way to learn how to read markets, without the distractions of multiple indicators and complicated strategies. This could be a more precise way of trading and will also save time in making decisions.
Learning how to trade forex naked without indicators will require some effort to learn. The easiest way to practice trading naked is to use a reliable broker that offers a demo account. Demo accounts are a great way to learn how to watch the market, see if you can recognize patterns, and practice making trading decisions without risking any real money.
At tixee, we have a free demo account for beginner traders, and a range of trading accounts to suit all levels of trading experience.
There’s no right way to trade forex. Each trader must choose a method that suits their level of expertise and experience. Trading forex naked without indicators could be a useful way to practice your market reading skills and learn how to recognize market cycles and movements. It could also be useful to begin trading using the simplified approach of naked trading, before moving on to the more complicated maths and statistics that trading with indicators needs.
As in all trading, traders that are disciplined, focused, respect their method, and adhere to strict risk management guidelines are more likely to be successful over the long term. Naked trading carries the same sorts of risks as any other trading strategy.