How long have you been trading? If you have been trading any more than a few months, chances are you have gone through many cycles of trading systems, timeframes and strategies. You have probably tried multitudes of different indicators, stop loss strategies, entry signals and alert services, and more than likely you are still trying new indicators as they are released by Joe Blog in a forum somewhere (such as that Akuma99 fellow and his Stormy indicator). What about trading naked? Have you tried that? It really is invigorating.

Now before I get complaints from mothers, wives and boyfriends, by trading naked I do of course mean, trading a chart with NO indicators at all, nothing, nul, zero, zilch, nada ... you get the idea. Anyone reading this blog for a while will know I am an advocate of minimising the amount of indicators on your charts, but this time I am coming from a different angle.

Here is a hypothetical, a trader starts out with very little knowledge of technical analysis, they trade with consistent losses, and so start add indicators to their charts trying to find that "magic bullet" that will turn things around. Slowly their knowledge builds, and they start to understand which indicators are best for their trading style, and things start to turn around, making some consistent, while small profits and things are looking better. This might continue for a little while, before the want for greater profits, or just sheer curiosity brings them to try something new, perhaps with some success, perhaps not, with the thought that they can always go back to what was working before. Soon they have a whole new set of indicators on their charts, and their results start to suffer, soon they realise this and try to go back to their original system but find it is not working any more, so they add a new indicator ... and the cycle continues.

... when you are trying so many new indicators, systems and alerts, things can get jumbled up and confusing ...

Hopefully not many of you fit this description, but I fear many would (I did for sure at one point), so how do you get out of this loop? Trade naked. I believe this because essentially, despite all the colourful lines, histograms, oscilators and arrows, profits are made when the PRICE moves in the direction you have predicted. It is price that all indicators are based off, and it is price that will ultimately decide your fate in the markets. I found the best way to clear confusion is to simply strip my charts clean, switch to demo mode, and trade a week with no indicators at all, ultimately this is how I ended up trading live as well but that is a personal preference.

So why do I think this works? Here in Australia, there is a phenominal swimmer named Ian Thorpe, who does, or has held the world records in the 200m, 400m and 800m freestyles. He won his first world championship at 14 years old, and is touted as the best Australian swimmer of all time. He has been asked many times, how he swims so smoothly and yet so fast, and his answer is always "I have a feel for the water". Most elite sportsman will talk about "being in the zone", when they can just feel what is going to happen and act on it instantly, Jordan, Woods, Federer ... they all talk about it. So what has this got to do with trading? Well the easiest description of what "being in the zone" feels like is when things just seem uncomplicated and easy. When you know what needs to be done and you do it. When you are trying so many new indicators, systems and alerts, things can get jumbled up and confusing as you try to remember what a red line above a green line but between a blue line while above the histogram means.

Trading naked, lets you look at the core of trading, price action. By trading naked you are exposing yourself to what all of your indicators are interpreting, and you are letting the greatest supercomputer in the world, your brain, process, calculate and interpret what is in front of you. Even if you are a die-hard indicator user, if you do this even a day every month, it will ground you in the basics, and help you get that "feel" for the markets. I don't talk about this from theory, I did this when things weren't going my way at the beginning of my live trading, and the result really benefited from it. The recent process of developing the Stormy Indicator had the same effect, and so the last two days I traded naked, back to the basics, and things became clearer again, to demonstrate here are my "virtual" results since Monday:

+314 pips and around +20 in open positions, which is great, but it being virtual, really doesn't mean too much as there is no emotion involved but that is whole new article.

So give it a go, I firmly believe it will help you in the long run, whether your system includes indicators or not.

Happy trading!

This entry was posted on Wednesday, January 11, 2006 at 8:35:00 AM. You can skip to the end and leave a response.