John Templeton, who has been involved in forex day trading for more than five years and who is the creator of the Trading in the Buff forex signal system, soon found out that all the complex systems 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 haphazard lines to cross, informing me that I should open or close a trade. Then it dawned on me. How in the world could I make money trading forex, if I don't even know what I am looking at?"
This is when John decided to take the bull by the horns and to reason things out for himself. No more accepting this or that forex system theory. He began by heeding what all the experienced traders had to say on the subject. And more than any other catchwords 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 forex market, John concluded that the trader has to take a decision between one of two ways to examine the trade: either by using fundamental analysis or using technical analysis. Fundamental analysis takes into consideration all the psychological fundamentals that can act upon a currency's tendency in the market. Things like the influence that the non-farm payroll numbers that are released once a month can have, or how raising or lowering interest rates can influence a given currency pair.
When it comes to using technical analysis, this type of trader considers that opening up the indicator menu on their charting platform will in some way reveal to 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 knowing price movement -- adhering to charts filled with lagging indicators such as RSI, MACD, and stochastics will guide them to the right trade to enter. After enduring years of losing trades following this same formula, John is persuaded that following this path is a losing cause.
The one technical indicator that most failing present day traders don't utilize is price action. They're all expecting all their other indicators to match up. For this kind of trader, the only important thing is what his static indicators are showing him, and price becomes secondary or even irrelevant. The only thing wrong with using lagging indicators like these is that they do not supply the trader a clear picture of what the market is realistically doing during a given trading period.
When, for example, you teach yourself to begin considering price support and resistance levels, you are being shown actual statistics which are having an impact on the movement of the market. No lagging indicator is ever going to give you that kind of knowledge which will hold up for very long. You have to be able to see it immediately from the market itself. This is what John is endeavoring to hammer home in his currency trading system Trading in the Buff.
The name of his method references the shedding of indicator based strategies and returning to basic price action indicators. In other words, trading in the buff, without using the theoretical indicator window dressing that many traders learn to base their trading habits on. The theories sound good, but they don't necessarily work.
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