“Trading Forex without indicators” is a much-hyped phrase these days. What follows are some tips to help you do this successfully. Contrary to popular belief, however, there is no gigantic mystery involved and the concept of “price action” trading is nothing new. In fact, before there ever computers or an Internet or an online broker stock speculators used to watch prices change as new prices became available on tickertape! That in and of itself should give an idea of exactly how old trading without indicators is.
Trading channel breakouts can be highly effective — this is one of the favorite non-indicator trading methods. Here’s how it works. First let’s define what the channel is. The channel is formed by high prices and low prices over a particular period of time. If, for instance, we were looking to trade a 10 day channel breakout system the top part of our channel would be the highest price over the last 10 days and the bottom part of our channel would be the lowest price over the last 10 days. If you can just imagine drawing a horizontal line at the highest price and a lower horizontal line at the lowest price you can also imagine that these form a “channel”, hence the phrase “channel breakout”.
The theory behind channel breakouts is that once the price exceeds the top part of our channel it may have the necessary momentum to go even higher. Once the price goes below the bottom part of the channel it may have the downward momentum to go even lower. Once the price exceeds the high part of the channel or the low part of the channel it is said to “break out” of the channel. This is an especially effective method.
Don’t be afraid to wait for confirmation — there are number of ways to trade our channel breakout system above. One way is to simply buy the market when the price exceeds the price of the upper part of our channel. This is a fairly common way of trading. Another way to buy or go long is to do so after the currency pair’s closing price is above the upper part of our channel. It is also possible to delay entry even longer by requiring that there be two closing prices above the upper part of our channel.
What we have described above with reference to our channel breakout system is a simple system of confirmation. Many traders choose to use some form of confirmation in order to feel more confident that the breakout is not a fake one.
The price is right — no, I’m not talking about the name of the popular game show. This should be the motto of anyone trading Forex without indicators. That is because in price action trading the price is always right. Many beginning traders get into trouble try to interpret where the price should be rather than where the price is and has been previously. As technical traders we must understand that no matter what economic or political conditions may prevail that the price will reflect those conditions over time. After all “price” is the key to price action trading.