The naked trading forex strategy is a popular trading method in which traders analyze the markets without any aid of technical analysis indicators. In other words, they rely on their ability to see signals that appear in the market and make trading decisions without additional tools.
So, what do you think? Are you interested in learning the ins and outs of the naked trading strategy? Of course, you are! Then read on.
Table of Contents
What is the Naked Trading Strategy?
Naked trading, also known as price action trading, refers to a trading style without any trading indicators. As the name implies, when you naked trade, you look at a clean naked price chart without drawings, trend lines, and technical analysis indicators.
Simply put, this strategy doesn’t include any indicators, statistics, or complex math. Instead, a trader who analyzes the market using the naked trading strategy uses real-time price action, and… that’s it!.
It’s the simplest, purest, and oldest form of trading. Instead of analyzing the market’s past performance and adding indicators, naked traders rely on their trading instincts and experience to make trading decisions.
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How Does the Naked Trading Strategy Work?
The naked trading forex strategy strips trading down back to its basics. It’s exactly what it’s called because it is a trading method without the aid of technical indicators, and, therefore, it is also known as the price action trading strategy.
When you utilize the naked trading strategy, you make decisions based on your trading instincts and the current market conditions rather than on past or future price movements. Powerful trading in its most basic form. Pure price movement action, key support & resistance levels, and simple entry and exit rules.
Naked traders simply believe it’s much easier to see support and resistance levels, trend reversals, and price corrections on a chart without adding complex tools such as moving averages, trend lines, and various technical analysis indicators. Instead, they look at a clean chart and learn to identify entry and exit levels by analyzing bar, line, or Japanese candlestick charts. And that is, in a nutshell, how the naked trading strategy works.
Does the Naked Trading Strategy Work?
With naked trading, your success depends on your ability to read the markets and make successful trading decisions. Those price action decisions are made with the trader’s instinct rather than analysis. So, it is whatever you make it.
Obviously, you must get familiar with candlestick patterns, support and resistance levels, key economic events, and more. But ultimately, if you have the instinct or the sixth sense to predict where the market might move next, the naked trading strategy will undoubtedly work for you.
Naked trading the simplest, purest, and oldest form of trading. Instead of analyzing the market’s past performance and adding indicators, naked traders rely on their trading instincts and experience to make trading decisions.
Tools and Techniques to Trading Naked Without Indicators
Although naked trading is based on price action analysis without the aid of indicators, you can use several tools and techniques to improve the naked strategy’s efficiency. Let’s take a close look at some of those:
Practice on a Demonstration Account
The first thing you can do is open a demonstration account and start trading naked. It is the easiest way to figure out whether you feel comfortable trading naked. Obviously, you’ll have to treat your demo trading as a serious project by putting aside the amount you are about to deposit and setting realistic profit targets. By doing so, you can realize on a demo account if you have the instincts and confidence to make trading decisions without any indicators.
Level 2 Market Data
Many professional traders who specialize in naked trading also use level 2 market data to find trading opportunities. For those unaware, level 2 market data is a more detailed order book that enables you to view a list of buyers and sellers in the market, including the market maker and the quantity of each order.
By using a level 2 order book, naked traders can make trading decisions without the additional use of trading indicators.
Order Flow Analysis
Another technique to trade naked is to use the order flow analysis strategy. In essence, order flow is similar to level 2 market data; however, order flow analysis can be displayed directly on a price chart. With this tool, it is easier for naked traders to recognize market imbalances and scenarios when large institutions and big players enter the forex market to place large order blocks.
Work on Your Trading Psychology
If you want to become a successful naked trader, you need to work on your trading psychology. After all, naked trading is mostly about understanding market psychology and how the market behaves without using additional tools. The more you work on your trading psychology, the better naked trader you will ultimately become.
So, as a starting point, you can read psychology trading books, watch recommended trading documentaries, and regularly listen to trading podcasts. We also suggest you visit our lesson about the psychology of forex trading.
Naked Trading Strategy – Pros and Cons
Let’s take a closer look at some pros and cons of the naked trading forex strategy.
Pros
- Eliminates the need the analyze the markets with complex technical analysis tools and patterns
- The trading process is much simple as it’s easier to analyze the markets
- The naked trading strategy is flexible, meaning you are not limited to one or two strategies
- Within time, naked traders can significantly improve their analysis skills
- The charting trading setup is much cleaner and easier to interpret as there are no indicators and drawings
Cons
- You cannot use automated trading systems with the naked trading strategy
- The success of the strategy mostly depends on the trader’s mindset and state of mind
- It takes time to master the naked trading strategy
- The naked trading strategy might not be suited for every forex trader
How to Get Started Trading Naked?
The naked trading forex strategy has been tested and proven by many traders. It’s a simple yet powerful way to trade any financial instrument. It somehow takes the uncertainty and guesswork out of the equation for every forex trader.
If you are ready to start trading the markets using the naked trading strategy, then we are here to help you… You can join our Trading Room and Sign Up for our Funded Trading Account program.
Here’s what you get with HowToTrade:
- Fully funded trading account
- Access to our trading room, where you can discuss the forex day trading strategy with market analysts and other members of the community
- Easy-to-understand video lessons
- Stock and forex education lessons
- Technical analysis and chart pattern guides
- News and updates are sent directly to your inbox
- Register absolutely free
Frequently Asked Questions (FAQs)
Here are the most common questions about the naked trading strategy in forex:
Is naked trading the right trading style for me?
It’s hard to know if trading naked is the right strategy for you. Naked trading can be very profitable for naked forex traders who can observe the forex market and react to what’s happening in real time. They focus on what is happening in the market at the time they are trading without much consideration of past performance and what technical indicators signal. Moreover, when they trade forex, their decisions are heavily based on human psychology, as they believe that the main driver of price movements is human emotions.
So, if you feel you have what it takes to become a naked trader, just go for it.
How can I learn to trade naked without any indicators?
The best way to learn how to naked trade is to open your trading system, open a naked chart, and start to practice naked trading financial markets. Forget about tips and techniques that will make you a successful naked trader. It’s all about your ability to read the markets quickly and correctly.
But remember, it takes time and money. And this is where we can help you. With our capital allocation program, you have 180 days to pass our prop trading evaluation process. During this time, a trader can test different trading strategies with the firm’s capital and without any initial investment. Once you pass the evaluation process, you can become a full-time forex trader with a fully funded trading account and keep 70% of the profits.
What skills do I need to trade naked?
The advantage of using the naked forex trading strategy is that the market analysis process is more straightforward. There’s no need to know how different indicators work, and the strategy does not involve the analysis of past and future price performance. Having said that, you must have some essential skills to utilize the naked trading strategy and find trading opportunities. These include the basics of candlestick charts, chart patterns, support and resistance levels, and, most importantly, understanding market psychology.
Mimic how professionals trade. Discover your inner talent.
Learn everything you need to know about trading the markets from beginner level to the most advanced, helping you to create critical skills and techniques to you can apply in your trading right away.
