This is a very relevant topic to discuss
The concept of Naked Trading is beginning to assume the attributes of a new fashion vogue compared with the “old-fashioned” indicators approach and it has become very “in” to “trade without indicators” and to condemn them to the waste bin as only being “history” or “lagging”. In my opinion, this is not an issue of one method vs another but simply yet another different method of achieving the same objective of identifying the likely future direction of price.
Both methods have their own benefits and it is up to each trader to decide which approach works best for them. I do not really accept the argument that Price Action is current and Indicators are lagging. If you look at the excellent example posted by Dennis 3450 you will see a daily bar shown as an example of a pin bar. But this one bar comprises, and requires, an Open, Close, High and Low stretching over a period of the previous 24 hours. If, alternatively, another trader looks at the same 24 hour period with, say, a pair of short-term MA’s on a 1H or 15M chart then he is simply analysing approximately the same time period but with a very differerent approach that is also looking at price movement within that 24 hour. Similarly, using Support and Resistance lines are simply comparing current price with historic price levels that may stretch back even months into the past. So the issue here, surely, is not which method is “right” and which is “wrong” or which is “current” and which is “lagging”, but which best suits the trader’s own approach and preferred visualisation of price action.
For example, I use a very simple combination of a couple of indicators and go “blind” when I look at some other traders’ charts that are smothered with a mass of all kinds of oscillators, lines, clouds, and ratio numbers. This to me is the ultimate “analysis paralysis” syndrome and my brain simply seizes up when looking at it - but for others it obviously really tells a story!
But I think the real issue underlying this question is how well a trader [I]actually [/I]understands the underlying principles that create the lines/patterns/formations that he is acting on. For example, does a trader simply recognise a pin bar and blindly, automatically, trade off it or does he look at it in the context of recent bars/trends/volumes/market times/data releases etc and analyse does this represent early buying running to heavy selling later in the session that pushes the price back to beyond the opening level? Does this selling more likely predict new positions or just proft-taking ahead of an important data release - and so on.
Often, it seems that indicator lines take on a life of their own and traders talk of a line “stopping the price” here or there. Of course, price is totally blind to technical lines (except to a certain extent through the “self-fulfilling” reaction to levels widely recognised throughout the trader community) and will go wherever the prevailing selling/buying pressures and volumes take it regardless of anyone’s “lines”.
If one concentrates on intelligently understanding what their chart lines, patterns, levels etc are really suggesting and combine that with what they are actually seeing in actual price movement and volumes then they are likely to succeed whatever method of analysis they are using.
At least that is how I see it, others will no doubt see things entirely differently! - but that is precisely why this is such a good and important topic to discuss