Technical Analysis Without Indicators

The Saturday Solopreneur

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Technical Analysis Without Indicators

Read Time - 1min

Technical Analysis Without Indicators

Read Time - 1min

In this edition I want to talk about the heart of my trading philosophy, one that steers well away from indicators. The way that I trade, and the way that I have been teaching my students for over 5 years now, relies on market structure, key levels, volume and momentum, and most importantly keeping things simple by focusing on a single candles movements.

In the first few years of my trading journey, I tried everything from candlestick patterns and indicators to and trading robots and smart money concepts. I used to think that I would eventually find the holy grail. As you can imagine this led to years of inconsistency and many blown accounts.

I knew trading was what I wanted to do but I just couldn’t find anything that worked. So I decided to screw the indicators and all the fluff and just LOOK at the charts and figure out what was happening in front of my face. I started to pay much more attention to market structure and how price reacted around key levels. This may seem basic to some of you now but remember this was over 10 years ago when there was not a lot of content online.

The thing I find with indicators is that they can often muddy the waters, especially if you are a pure price action trader. They provide lagging signals that get in the way of quick decision-making. So when I started to focus on price action, market structure, key levels, and a single candles movements, this became the bedrock of my technical analysis, and it was a game-changer.

I also started focusing on the 4h as my higher timeframe. I see a lot of traders doing a top-down analysis of their charts, starting off with the weekly or sometimes even monthly timeframe, and working their way down to the 15m or 5m. Nothing against these traders but honestly, it doesn’t need to be that difficult. As an intraday trader, I am only ever going to be trading two or three 4h candles in a day. So when I sit at my charts in the morning, all I want to know is where is price headed during the next 4 to 8 hours that I will be trading. So for this, I find the 4h timeframe the most useful. I mark my key levels on the 4h timeframe, figure out where the next 4h candle is headed and then drop down to my entry timeframe.

Here are 3 actionable points you can introduce to your trading to enhance your technical analysis:

 1.Identifying Key Levels

Make key levels a cornerstone of your technical analysis. Price is always drawn towards key levels, so trading in-between levels or off them is a great starting point. Pay close attention to areas where price has repeatedly reacted strongly. There will usually be a depletion of volume as price reaches key levels, and this will be indicated by smaller candles and/or indecision candles. The depletion is usually followed by wick rejections and momentum candles pushing away from the key level. These levels act as guides for decision making, helping you identify potential reversal areas, and reliable entry and exit points. I would recommend clearing your charts and marking up your key levels on a daily basis. See the below example of a key level. Pay attention to the candles as they approach the levels, they become smaller in size, indicating a depletion of bullish or bearish pressure. This is followed by wick rejections, which indicates that price attempted to break the level and failed.

2.Keep Your Analysis Simple

Simplify your approach by focusing on price action. Take the above example, I don’t need an indicator to tell me what to look for. Price is clearly approaching the support level, so I will either look for a reversal here if given the evidence on my entry timeframe, or alternatively I’ll wait for price to break below the level and then look for evidence to sell. All you need to do is to analyse how a single candle is moving and how it will interact with the key level. By discarding indicators and honing in on price action, you gain clarity and you can make quick decisions based on real-time information.

3.Multiple Timeframe Analysis

The above example is on a 4h timeframe. Realistically, do I need to be concerned about the daily or the weekly timeframe if I am only going to be trading the next one or two 4h candles? The answer is No, because I don’t care about where the daily candle is headed. I can see that during my 4 to 6 hours of trading price is going to be interacting with the 4h levels shown above. So I would encourage you to opt for a timeframe that aligns with your trading style. And if you’re an intraday trader, like me, then the 4h timeframe is the most effective.

If you implement the above 3 points into your technical analysis, you will streamline your approach, make more informed decisions, reduce confusion and remove  unnecessary indicators complicating your trading. Remember, the key is to keep it simple, focus on what works for your trading style, and consistently apply theses principles in your analysis.

Until next time, continue to TRUST THE PROCESS!

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