Technical indicators are very useful in Forex trading, but by no means are required. Moreover, many professional traders prefer to trade without indicators, as they consider it more effective.Indicator-free trading: advantages
- Simplicity. Many indicators are quite difficult to use, a trader needs to have certain skills in order to properly set them up and interpret their signals.
- Accuracy. Most of the popular indicators are lagging, therefore, their readings are not always correct. For example, if you are trading with a trend and want to close a position when a reversal occurs, the indicator can show a reversal when it has already taken place. This means that with the closing of the deal at the most advantageous point, you could already be late.
- Develops a sense of the market. When you trade on a "clean" chart, you become more attentive to price fluctuations, learn to observe market changes and understand it better. And for a trader it is very useful.
The first way is to trade on fundamental analysis using only the economic calendar. Indicator-free Forex news trading is a fairly common type of trading that even a beginner can easily master. To do this, you first need to select the currency pair you want to trade, and then monitor the release of important macroeconomic statistics on a daily basis that is relevant to your chosen currencies. For example, if you are trading USD / JPY, then pay attention to the news from the USA and Japan. As a rule, when a country publishes positive economic data, its currency strengthens, and the publication of weak data indicates a downturn in the economy, so the demand for the currency decreases and the currency itself weakens in value.
Please note that trading shortly before the publication of important news and immediately after it is not recommended for beginners, because at this time the volatility is increased and it is difficult to predict the price direction. It is best to wait for the market to calm down a little, see which trend (upward or downward) has formed and open a position along this trend. We also recommend reading Keltner Channel Indicator.
The second way is to use graphical analysis: a profitable forex strategy without indicators is often based on it. Have you ever heard of such patterns as "head and shoulders", "double bottom", "triple top"? These are all patterns on Forex charts, which can be used to determine whether the trend will continue or reverse. For example, after the completion of the “double bottom” pattern, the price breaks the support level, exits the flat and forms a downtrend. The moment when the “bottom” is broken is one of the best for opening a sell trade.
A variety of graphical analysis is Forex candlestick analysis. To do this, you need a candlestick chart - it is available in any trading terminal. On this chart, price fluctuations are represented in the form of candles: a white candle - an increase in the quote, a black one - a decrease. The body of a candlestick is the distance between the opening and closing prices of a time period (for example, 1 minute), and shadows are the high and low of the price for this period. From this data, you can determine whether the price will rise or fall. For example, the hammer candlestick pattern indicates a likely trend reversal, while the doji indicates the formation of a flat.
Candlestick trading without indicators is highly accurate and allows you to quickly react to any market changes, which makes it so attractive to traders. In addition, candlestick analysis is equally effective on any timeframe, from 5 minutes to 1 month.