It seems like more than ever, traders have gotten away from learning to trade forex with no indicators. You can tell by the thousands of trading systems that are drenched with indicators that are on the market today. If you are a purists of trading, you know that the most successful traders of all time didn't need to use all these kind indicators to trade. They were able to base their trading decisions just off of the price action.
Believe it or not, trading price action is not as hard you think. In actuality, it's much easier than having to rely on these short cut indicators.
It doesn't which indicator you are talking about, there biggest problem is that they are lagging.
To give you an example, let's use one of the most popular indicators, stochastics.
Most of the so-called gurus out there tell you that that you should trade when the two stochastics lines cross each other. Whether it be opening or closing the trade.
When you pull up a chart and back test the strategy, it looks absolutely incredible. It should because all its doing is following whatever the price of the currency is doing. You can't help but wonder if you could be rich just trading stochatics crosses.
This is how they reel in every newbie trader. The problem is no one thinks to themselves, if this is so simple than how come so many people are failing to make money on forex? After all the only thing you have to pay attention to is two lines crossing. How hard can that be?
The problem is what you see in the back testing is not what you're going to see in real time. In back testing, you might see the stochastics cross once and it triggered the buy and sell order. When you look at it in real time, the stochastics might have crossed and uncrossed three or four times before the price finally moved. If you traded every single cross you would have ended up with a lot of losses.
The best advice I can give a new trader is to look at a chart without any indicators. Just completely clean out your charts so all that is left is the price itself. Once you have a firm grasp of price action, trading becomes a lot simpler.
Believe it or not, trading price action is not as hard you think. In actuality, it's much easier than having to rely on these short cut indicators.
It doesn't which indicator you are talking about, there biggest problem is that they are lagging.
To give you an example, let's use one of the most popular indicators, stochastics.
Most of the so-called gurus out there tell you that that you should trade when the two stochastics lines cross each other. Whether it be opening or closing the trade.
When you pull up a chart and back test the strategy, it looks absolutely incredible. It should because all its doing is following whatever the price of the currency is doing. You can't help but wonder if you could be rich just trading stochatics crosses.
This is how they reel in every newbie trader. The problem is no one thinks to themselves, if this is so simple than how come so many people are failing to make money on forex? After all the only thing you have to pay attention to is two lines crossing. How hard can that be?
The problem is what you see in the back testing is not what you're going to see in real time. In back testing, you might see the stochastics cross once and it triggered the buy and sell order. When you look at it in real time, the stochastics might have crossed and uncrossed three or four times before the price finally moved. If you traded every single cross you would have ended up with a lot of losses.
The best advice I can give a new trader is to look at a chart without any indicators. Just completely clean out your charts so all that is left is the price itself. Once you have a firm grasp of price action, trading becomes a lot simpler.
About the Author:
Jim Buhs has had success as a forex trader after learning about price action. Once he saw that all it took to have forex trading success was on a clean chart trading with no indicators, his profits took off.
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