Alex Nekritin - Naked Forex: high-probability techniques for trading without indicators

Founded in 1807, John Wiley & Sons is the oldest independent publishing company in the United States. With offices in North America, Europe, Australia and Asia, Wiley is globally committed to developing and marketing print and electronic products and services for our customers professional and personal knowledge and understanding.

The Wiley Trading series features books by traders who have survived the markets ever changing temperament and have prosperedsome by reinventing systems, others by getting back to basics. Whether a novice trader, professional or somewhere in-between, these books will provide the advice and strategies needed to prosper today and well into the future.

For a list of available titles, please visit our Web site at www.WileyFinance.com .

Copyright 2012 by Alex Nekritin and Walter Peters. All rights reserved.

Published by John Wiley & Sons, Inc., Hoboken, New Jersey.
Published simultaneously in Canada.

No part of this publication may be reproduced, stored in a retrieval system, or transmitted in any form or by any means, electronic, mechanical, photocopying, recording, scanning, or otherwise, except as permitted under Section 107 or 108 of the 1976 United States Copyright Act, without either the prior written permission of the Publisher, or authorization through payment of the appropriate per-copy fee to the Copyright Clearance Center, Inc., 222 Rosewood Drive, Danvers, MA 01923, (978) 750-8400, fax (978) 646-8600, or on the Web at www.copyright.com . Requests to the Publisher for permission should be addressed to the Permissions Department, John Wiley & Sons, Inc., 111 River Street, Hoboken, NJ 07030, (201) 748-6011, fax (201) 748-6008, or online at http://www.wiley.com/go/permissions .

Limit of Liability/Disclaimer of Warranty: While the publisher and author have used their best efforts in preparing this book, they make no representations or warranties with respect to the accuracy or completeness of the contents of this book and specifically disclaim any implied warranties of merchantability or fitness for a particular purpose. No warranty may be created or extended by sales representatives or written sales materials. The advice and strategies contained herein may not be suitable for your situation. You should consult with a professional where appropriate. Neither the publisher nor author shall be liable for any loss of profit or any other commercial damages, including but not limited to special, incidental, consequential, or other damages.

For general information on our other products and services or for technical support, please contact our Customer Care Department within the United States at (800) 762-2974, outside the United States at (317) 572-3993 or fax (317) 5724002.

Wiley also publishes its books in a variety of electronic formats. Some content that appears in print may not be available in electronic books. For more information about Wiley products, visit our web site at www.wiley.com .

Library of Congress Cataloging-in-Publication Data:

Nekritin, Alex, 1980
Naked Forex : high-probability techniques for trading without indicators / Alex Nekritin, Walter Peters.
p. cm. (Wiley trading ; 534)
Includes index.
ISBN 978-1-118-11401-8 (cloth); ISBN 978-1-118-22435-9 (ebk);
ISBN 978-1-118-26244-3 (ebk); ISBN 978-1-118-23749-6 (ebk)
1. Foreign exchange market. 2. Foreign exchange futures. 3. Speculation.
I. Peters, Walter, 1973- II. Title.
HG3821.N45 2012
332.45dc23
2011043306

For all gun traders as well as those rude and cute possums of the world.

Foreword

The Internet engendered the online trading phenomenon. One can trade anywhere there is a connection to the World Wide Web. The result has also been the creation of instant experts, trading gurus who offer modern versions of snake-oil cures for traders. The web is flooded with trading alerts, systems, and blogs that promise returns that will lead to instant wealth. Most of the books in the field fail to provide actionable knowledge. In this environment, Alex Nekritin and Walter Peters in Naked Forex: High-Probability Techniques for Trading without Indicators provide an honest and effective presentation about forex trading that certainly beginners need, and that more experienced traders forget they need.

Naked Forex makes some powerful points about trading forex that really apply to other markets as well. First and foremost, price is the most important indicator of all. All indicators are derived from price. Many traders have forgotten this fact because computerization has made it easy to generate new indicators. Indicators work more like training wheels for learning to ride a bicycle. They are temporary in their capacity to help traders build their skills. They actually limit the evolution of a traders performance because they provide a disincentive to listen to the market. Naked Forex goes into detail on how a trading signal that is indicator-based is inferior to what Nekritin and Peters call a naked signal.

Another key insight that the book provides is the importance of knowing ones personality in trading. Trading systems that are based on untested algorithms that are purely technical will surely fail. Nekritin and Peters argue that trading systems should reflect decisions that traders would make that are based on looking at charts. Manual backtesting, they suggest, is an effective way to identify a trading systems strengths and weaknesses.

A third major focus of Naked Forex is the concept of identifying support and resistance zones. The fact is that with the trillions of dollars that float each hour through the currency markets, prices reach certain levels and stop. One can try to figure out why they stop rising or stop falling. But the job of the trader is to observe accurately where the price is and where it came from. Price zones provide the naked truth about market sentiment. If a price breaks through a zone, no matter what the reason, it is a signaland a more powerful signal than any indicator. Nekritin and Peters call these points of price action market scars. It is a good metaphor because markets have memory and so do traders. The authors introduce the last-kiss trade as a powerful tool in identifying when breakouts have occurred. The book is filled with gems that provide visualizations of price action, such as the big shadow, kangaroo tails, and the big belt.

As someone who has been training people on how to trade forex for nearly 13 years, I welcome this book as one that stands out as a basic manual on how to evaluate and trade the increasingly chaotic forex markets. I will use it for my students.

Abe Cofnas
author of Trading Binary Options (Bloomberg) and
editor of The Fear and Greed Trader Newsletter ,
Agora Financial, Inc.

Preface

Unfortunately, most forex traders lose out. Profitable trading is reserved for the select few. Expectations drive reality for many things in life, and successful trading is no different. Most forex traders have three preconceptions about successful trading. These are the three myths of successful trading, and the structure of this book is based on each of these myths.

Myth 1: Successful trading must be indicator based. The first part of this book dispels this myth. There are many ways to profit in forex, some of them do involve indicators, but indicators are not necessary for successful trading. There are professional traders around the globe, many of them good friends of mine, who use naked charts to make trading decisions. In some ways, indicators delay the progression of the trader because the focus is on the indicator, rather than price action. Indicators become the scapegoat for losing streaks and often keep losing traders in a holding pattern. It is much easier for the novice trader to begin trading without indicators from the beginning.