John Templeton, who has been an investor in forex day trading for more than five years and who is the author of the Trading in the Buff forex signal system, soon discovered that all the confusing methods that traders use to pick a winning forex trade were only muddying the field for him. "I was basically just an inanimate object waiting for random lines to cross, signaling me that I should open or close a trade. Then it dawned on me. How in the world could I make a profit trading currency exchange, if I don't even know what I am looking at?"
This is when John determined to take the bull by the horns and to figure things out for himself. No more accepting this or that forex coaching theory. He started by listening to what all the experienced traders had to say on the topic. And more than any other expression that came out of their mouths was the phrase "price action." John was so shocked at himself that he could have kicked himself. "It was so obvious, I couldn't believe it."
When it comes to trading the foreign exchange market, John realized that the trader has to take a decision between one of two ways to evaluate the trade: either by using fundamental analysis or using technical analysis. Fundamental analysis takes into consideration all the psychological fundamentals that can influence a currency's movement in the market. Things like the impact that the non-farm payroll numbers which are released once a month can influence the market, or how raising or lowering interest rates can influence a given currency pair.
When it comes to using technical analysis, this kind of trader thinks that opening up the indicator menu on their charting platform will somehow or other inform them which currency pairs to trade based on how the indicators read. From John's point of view these traders seem to think that -- rather than understanding price movement -- paying attention to charts permeated with lagging indicators such as RSI, MACD, and stochastics will direct them to the right trade to enter. After enduring years of losing trades following this same formula, John is convinced that following this path is a losing cause.
The one technical indicator that most failed modern traders don't use is price action. They're all waiting for all their other indicators to fall in line. For this kind of trader, the only substantial thing is what his static indicators are showing him, and price becomes secondary or even irrelevant. The only thing wrong with using lagging indicators such as these is that they do not supply the trader a clear picture of what the market is truthfully doing during a given trading period.
When, for example, you discipline yourself to begin looking at price support and resistance levels, you are seeing actual statistics which are having an impact on the flow of the market. No lagging indicator will ever give you that kind of knowledge which will last for very long. You have to be able to see it directly from the market itself. This is what John is trying to hammer home in his currency trading program Trading in the Buff.
The name of his program references the removing of indicator based strategies and returning to fundamental price action indicators. In other words, trading in the buff, without using the theoretical indicator window dressing that many traders are taught to base their trading habits on. The theories sound good, but they don't necessarily work.
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