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ContentsCoverSeriesTitle PageCopyright

DedicationForewordPrefaceAcknowledgmentsPart One: NakedForex Trading

RevealedChapter 1: TheFundamentals ofForex TradingA QUICKLESSON INCURRENCIESPLAYERS OFTHE FOREX

MARKETTOOLS OF THETRADE:FUNDAMENTALVERSUSTECHNICALINDICATORSWHAT ISNAKEDFOREX?

Chapter 2: Avoiding aTrading TragedyIS THERE A“BETTER”INDICATOR?TAKINGRESPONSIBILITYFOR LOSINGTRADESLEARNING

FROM MARKETBIOFEEDBACK Chapter 3: BackTesting Your SystemTHREE GOALSOF BACKTESTINGMANUALBACK-TESTING

USING BACKTESTINGSOFTWAREAUTOMATEDBACK-TESTINGTOP THREEBACK-TESTINGTIPSChapter 4: Identifying

Support andResistance ZonesZONES AREBIG FAT BEERBELLIESOLD ZONES,NEW ZONESHOW TO FINDZONESFIVE TIPS FOR

FINDINGZONESPart Two:Naked-TradingMethodologyChapter 5: The LastKiss

WHAT IS ABREAKOUTTRADE?WHAT IS ALAST KISS?TRADING THELAST KISSChapter 6: The BigShadow

WHAT DOES ITLOOK LIKE?DOES BIGGEREQUALBETTER?THE STOPLOSSENTERINGTHE TRADEIMPORTANCE

OF THECLOSINGPRICEROOM TO THELEFTPROFITINGFROM BIGSHADOWSTHE RULES

Chapter 7: Wammiesand MoolahsTHE DOUBLEBOTTOMTHE DOUBLETOPIDENTIFYINGWAMMIES ANDMOOLAHSHOW TO

TRADEWAMMIESHOW TOTRADEMOOLAHSTIPS FORWAMMIES ANDMOOLAHSChapter 8: Kangaroo

TailsWHAT IS AKANGAROOTAIL?THE OPEN ANDCLOSEKANGAROOTAILS ARELONGKANGAROO

TAILPLACEMENTENTERINGTHE TRADETHE STOPLOSSPROFITTARGETSKANGAROOTAIL TIPS

Chapter 9: The BigBeltWHAT IS A BIGBELT?THE BEARISHBIG BELTTHE BULLISHBIG BELTTIPS TOTRADING THE

BIG BELTChapter 10: TheTrendy KangarooWHAT IS ATRENDYKANGAROO?TRENDINDICATORSTRADING

RISTIBEWARE THETRENDYKANGAROO

TRAPSChapter 11: Exitingthe TradeEXITING WITHMONEYEXITSTRATEGIESMANAGINGEXITS

Part Three:TradingPsychologyChapter 12: TheForex CycleWHAT IS THECYCLE OFDOOM?

LIVING IN THECYCLEDEFEATINGTHE CYCLEChapter 13: CreatingYour Trading SystemWHAT DO YOUBELIEVE?RISK RULES

MANAGINGYOUR DINGSYSTEM

Chapter 14:Becoming an ExpertWHY DO YOUWANT TOTRADE?THE SECRETOF THEEXPERTSSIX STEPS TOBECOMING AN

EXPERTDOING ITAGAINBORINGTRADING ISEXPERTTRADINGA SIMPLETRICK

Chapter 15: GainingConfidenceTHE ORIGINOFCONFIDENCEISSUESCONFIDENCEIN YOUREASONS FORLOSING

STREAKSTHE BADMARKETTHEORYChapter 16:Managing RiskYOUR RISKPROFILETRADING

PSYCHOLOGYAND RISKMANAGEMENTRISKY MONEYTRAPSAbout the TradingSoftware and VideoTutorial

About the AuthorsIndex

Founded in 1807, John Wiley& Sons is the oldestindependentpublishingcompany in the United States.With offices in NorthAmerica, Europe, Australiaand Asia, Wiley is globallycommitted to developing andmarketing print and electronicproducts and services for ourcustomers’ professional andpersonal knowledge andunderstanding.

The Wiley Trading seriesfeatures books by traders whohave survived the market’sever changing temperamentand have prospered–some byreinventing systems, othersby getting back to basics.Whether a novice trader,professional or somewherein-between, these books willprovide the advice andstrategies needed to prospertoday and well into the future.

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

Copyright 2012 by AlexNekritin and Walter Peters.All rights reserved.Published by John Wiley &Sons, Inc., Hoboken, NewJersey.Published simultaneously inCanada.No part of this publicationmay be reproduced, stored ina retrieval system, ortransmitted in any form or by

any means, electronic,mechanical, photocopying,recording, scanning, orotherwise, except aspermitted under Section 107or 108 of the 1976 UnitedStates Copyright Act, withouteither the prior writtenpermission of the Publisher,or authorization throughpayment of the appropriateper-copy fee to the CopyrightClearance Center, Inc., 222

Rosewood Drive, Danvers,MA 01923, (978) 750-8400,fax (978) 646-8600, or on theWeb at www.copyright.com.Requests to the Publisher forpermission should beaddressed to the PermissionsDepartment, John Wiley &Sons, Inc., 111 River Street,Hoboken, NJ 07030, (201)748-6011, fax (201) 7486008, or online athttp://www.wiley.com/go/perm

Limit of Liability/Disclaimerof Warranty: While thepublisher and author haveused their best efforts inpreparing this book, theymake no representations orwarranties with respect to theaccuracy or completeness ofthe contents of this book andspecifically disclaim anyimplied warranties ofmerchantability or fitness fora particular purpose. No

warranty may be created orextended by salesrepresentatives or writtensales materials. The adviceand strategies containedherein may not be suitable foryour situation. You shouldconsult with a professionalwhere appropriate. Neitherthe publisher nor author shallbe liable for any loss of profitor any other commercialdamages, including but not

limited to special, incidental,consequential, or otherdamages.For general information onour other products andservices or for technicalsupport, please contact ourCustomer Care Departmentwithin the United States at(800) 762-2974, outside theUnited States at (317) 5723993 or fax (317) 572–4002.

Wiley also publishes itsbooks in a variety ofelectronic formats. Somecontent that appears in printmay not be available inelectronic books. For moreinformation about Wileyproducts, visit our web site atwww.wiley.com.Library of CongressCataloging-in-PublicationData:

Nekritin, Alex, 1980Naked Forex : highprobability techniques fortrading without indicators /Alex Nekritin, Walter Peters.p. cm. – (Wiley trading ; 534)Includes index.ISBN 978-1-118-11401-8(cloth); ISBN 978-1-11822435-9 (ebk);ISBN 978-1-118-26244-3(ebk); ISBN 978-1-11823749-6 (ebk)

1. Foreign exchange market.2. Foreign exchange futures.3. Speculation.I. Peters, Walter, 1973- II.Title.HG3821.N45 2012332.4′5–dc232011043306

For all gun traders as well asthose rude and cute possumsof the world.

ForewordThe Internet engendered theonline trading phenomenon.One can trade anywhere thereis a connection to the WorldWide Web. The result hasalso been the creation ofinstant experts, trading guruswho offer modern versions ofsnake-oil cures for traders.

The web is flooded withtrading alerts, systems, andblogs that promise returnsthat will lead to instantwealth. Most of the books inthe field fail to provideactionable knowledge. In thisenvironment, Alex Nekritinand Walter Peters in hout Indicators provide anhonestandeffective

presentation about forextradingthatcertainlybeginners need, and that moreexperienced traders forgetthey need.Naked Forex makes somepowerful points about tradingforex that really apply toother markets as well. Firstand foremost, price is themost important indicator ofall. All indicators are derivedfrom price. Many traders

have forgotten this factbecause computerization hasmade it easy to generate newindicators. Indicators workmore like training wheels forlearning to ride a bicycle.They are temporary in theircapacity to help traders buildtheir skills. They actuallylimit the evolution of atrader’s performance becausethey provide a disincentive to“listen” to the market. Naked

Forex goes into detail on howa trading signal that isindicator-based is inferior towhat Nekritin and Peters calla “naked” signal.Another key insight that thebookprovidesistheimportance of knowing one’spersonalityintrading.Trading systems that arebased on untested algorithmsthat are purely technical willsurely fail. Nekritin and

Peters argue that tradingsystemsshouldreflectdecisions that traders wouldmake that are based onlooking at charts. Manualbacktesting, they suggest, isan effective way to identify atrading system’s strengthsand weaknesses.A third major focus ofNaked Forex is the concept ofidentifyingsupportandresistance zones. The fact is

that with the trillions ofdollars that float each hourthrough the currency markets,prices reach certain levels andstop. One can try to figure outwhy they stop rising or stopfalling. But the job of thetrader is to observe accuratelywhere the price is and whereit came from. Price zonesprovide the naked truth aboutmarket sentiment. If a pricebreaks through a zone, no

matter what the reason, it is asignal–and a more powerfulsignal than any indicator.Nekritin and Peters call thesepoints of price action marketscars. It is a good metaphorbecausemarketshavememory and so do traders.The authors introduce the“last-kiss trade” as a powerfultool in identifying whenbreakouts have occurred. Thebook is filled with gems that

provide visualizations ofprice action, such as the bigshadow, kangaroo tails, andthe big belt.As someone who has beentraining people on how totrade forex for nearly 13years, I welcome this book asone that stands out as a basicmanual on how to evaluateand trade the increasinglychaotic forex markets. I willuse it for my students.

Abe Cofnasauthor of Trading BinaryOptions (Bloomberg) andeditor of The Fear and GreedTrader Newsletter,Agora Financial, Inc.

PrefaceUnfortunately, most forextraders lose out. Profitabletrading is reserved for theselect few. Expectations drivereality for many things in life,and successful trading is nodifferent. Most forex tradershave three preconceptionsabout successful trading.

These are the three myths ofsuccessful trading, and thestructure of this book is basedon each of these myths.Myth 1: Successful tradingmust be indicator based. Thefirst part of this book dispelsthis myth. There are manyways to profit in forex, someof them do involve indicators,but indicators are notnecessary for successfultrading.Thereare

professional traders aroundthe globe, many of them goodfriends of mine, who use“naked” charts to maketrading decisions. In someways, indicators delay theprogression of the traderbecause the focus is on theindicator, rather than priceaction. Indicators become thescapegoat for losing streaksand often keep losing tradersin a holding pattern. It is

much easier for the novicetrader to begin tradingwithout indicators from thebeginning.Myth 2: Successful tradingmust be complex. The secondpart of this book is aboutnaked trading systems. Thesesystemsareincrediblysimple. Do not confusesimplicity with ineptitude.Although these systems aresimplewhenapplied

correctly, they may also yieldbigprofitsandbuildconfidence in your trading.You may view this as themeat of the book, the mostimportant section, but Idisagree. I think the thirdsection is the most critical toyour trading success.Myth 3: Successful tradingis dependent on the tradingsystem. This is probably themost widely held belief

among traders. This isprecisely why there arethousands of trading systemson the market, all promisinggreat riches to the bravetraders who pony up themoney for the next HolyGrail. Many veteran tradersunderstand the importance oftrading psychology. Personalbeliefs and attitudes towardrisk are the greatest predictorsof trading success, and the

trading system is not nearlyas important as many tradersassume. For most traders,after years of trading, this factbecomes apparent. The thirdsection of the book concernstrading psychology and howyou may both identify andchangeyourthinking,because this is the realdriving factor in your tradingsuccess.Many readers will continue

to hold onto these myths. Infact, some readers (those whobelievetradingsuccessdepends on the tradingsystem) will simply read thesecond section and begintrading the naked tradingsystems. This is unfortunate.The first section is criticalbecause it offers reasons forprice action trading (a newbelief system) and a course ofaction for becoming an expert

at naked trading (new tradinghabits). The third section iswhere breakeven and slightlyprofitable traders will learn tomove into the realm of thetrue professional trader. Allsections of the book areimportant, and it is my hopethat by reading it you willfind simple methods forextracting profits from themarket.You can trade successfully

without indicators. For manytraders, naked trading is bothrefreshing and easy to apply.You can trade successfullywith simple trading systems.Simple systems are robustand powerful. However,ultimately, your success as atrader will depend, not on thetrading system, but on howyou incorporate your beliefsand attitudes about risk intoyour trading routine. I hope