Naked Trading – The Beauty of Simplicity

Filed under: Learn Forex Trading |

A lot of traders, particularly beginners, seem hell bent on making the process of trading as complicated as possible. They think that the more indicators and the more lines that they draw on their charts, the better their chances of success. But this is not necessarily the case. Take a look at these two charts.

 

Figure 1.

Figure 1 shows a chart with a number of lines, squiggles, and pivot points; and this is only the tip of the iceberg. Some charts have up to four moving averages, Fibonacci retracement lines, pivot points, MACD, RSI, Bollinger bands, and more! Often, the charts end up looking more like a Jackson Pollock painting than a chart showing the price movement of a forex currency pair. It is a wonder that some traders can see anything because their charts are such a mess.

 

Figure 2.

Now look at Figure 2. This is what I call a naked chart. All that is on it is raw price action and a couple of moving averages so that we can easily see the current trend. Does that feel better? Can’t you just think much more clearly? If the answer is yes, then you should probably start trading using price action signals rather than a multitude of technical indicators (which are all lagging indicators by the way).

 

The best way to look at a chart is really by simplifying all of that data rather than making it more complicated. We need to assess the market sentiment and the psychology of the market, and looking at a naked chart best does this.  Although some technical indicators can be useful in getting confirmation signals that adds some confluence, in the end, it is price action that is the best indicator of where price is moving. So why not strip your charts down and trade them naked (but not literally of course!)? It just might make your trading career.

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