For the majority of individuals trading in the stock markets, each has his, or her own set of preferences when it comes to the technical indicators and drawings they choose to place onto their chart. Whether a trader favors watching the moving volume weighted average price (MVAWP), Bollinger Bands, or simply drawing support and resistance channels; all of these technical charting techniques are implemented by the trader in the hope to better-time their entry to the market and make consistent financial gains. Using technical charting tools for positional entries can also provide a solid basis for a trading system to be developed in the long-term.
Whilst most traders have some form of indicator or drawing on their chart, there is a growing consensus of individuals (myself included) who believe that these lines; moving averages, volume profiles, MACD’s etc. only serve to distract the trader from focusing on the only thing that matters, which is the current market price action (all hail Al Brooks!). The argument is that technical analysis is always derived from what has happened in the past, and as we well know, stocks have a high tendency of disregarding events which have occurred previously, and instead, carve out new chart patterns and formations which bear no relation to history.
When you draw a support line on a chart, you are using historical data in order to determine where you position this particular marking on your chart. It is true to say that recent areas of support will certainly have more bearing on the current price trajectory, than say, an area of support from two years ago, but it is also true that price very often ignores all that has happened prior and acts with the sole intention of finding value in the present moment.
Price discovery which is following a course of up-to-date economic events, or high impact news stories, can cause trend lines to be broken, moving averages to be disregarded, and markets to drive into extension far farther than traders can logically foresee in advance. The point is that the price of a stock, commodity or any other instrument is always seeking to find its true value in the here and now, and if for example, a companies quarterly profits have doubled, paving the way for global expansion plans, then the fact the price of the stock has reached a 'double top' on the chart is likely to be completely irrelevant.
Trading without indicators requires a strong understanding of both price action, candlestick patterns and potentially more advanced concepts such as Elliot Wave Theory, since these areas, along with the current news forecast is all you will have with which to formulate a conclusion about which way you will trade, and where you feel is a suitable entry point. Trading without any distractions on a chart means you are more able to focus on each individual candlestick and give your undivided attention to what the chart is telling you in the now, as opposed to attempting to make a prediction on where you think price will go in the future.
"Trading without any indicators or drawings isn’t for everyone, but what it does offer is yet another way for an individual to ascertain what works for them on a personal level when attempting to develop a successful strategy in the markets."
Some traders feel more confident when they have all manner of moving average lines and Ichimoku Kinko Hyo clouds covering every square inch of their chart, and if this helps them to come to more accurate conclusions about the direction of price then that’s great; for others, it may be that a chart without and drawings or distractions help them to focus and identify market movements with greater clarity. It certainly does for me, I look at some colleagues charts whose computer screens look like a really bad 5 year-olds drawing of a spaghetti junction and can’t understand what on earth that are basing market decisions on, and yet they are good traders who make money (just goes to show that everyone has their own style which works for them).
The natural reaction when analyzing bare charts is to identify areas which you have used in your previous charting methods, for example, price looked like it stalled in a particular area, and so a resistance line should be placed there; you will need to re-train your brain to ignore this. This can be a tough habit to kick when you are starting out trading without any drawings or indicators, so try not to jump in to this method of trading without spending some screen time getting used to this first. Your focus and attention will be far better served by attempting to analyze and describe what each individual candlestick is telling you about the price, and which time frame you are using will also make a difference to how much weight you place on that analysis.
It is commonly referenced that that there is a lot of noise on lower time frame charts, like 5 minute charts, and to largely ignore them. This is particularly bad advice as there is much you can learn from watching market patterns play out quickly on lower time frames, and it’s also one of the best ways a trader can get a feel for market rhythm. The patterns and movements markets make replicate themselves throughout time charts, and the reason why many people advise novice traders to start with higher time frames is because they are not quick enough to see the patterns on the smaller time frames, which generally takes considerably more experience and nous.
Trading charts without any indicators can be a revelation for some individuals, especially those that have seen their chart become more and more cluttered over time, without any improvement in results. It’s certainly a method all traders should test out at some stage, as it may serve as having a wholly positive effect on their trading performance. Studying as much information on candlestick patterns and and price action will help greatly when trading this method, and may in fact set you on a new trading path that sees you gain a much greater understanding of measured price moves, market dynamics, and rhythm. All of which will help enable you to establish a successful base level, from which you should be able to improve your performance in any market conditions.