A Realistic Assessment Of John Templeton's Trading In The Buff Foreign Exchange Course
John Templeton, who has been involved in forex day trading for more than five years and who is the author of the Trading in the Buff forex signal system, soon found out that all the challenging systems that traders use to pick a winning forex trade were only muddying the field for him. "I was basically just an inanimate object waiting for haphazard lines to cross, telling me that I should open or close a trade. Then it dawned on me. How in the world could I make money trading currency exchange, if I don't even understand what I am looking at?"
This is when John arranged to take the bull by the horns and to figure things out for himself. No more accepting this or that forex training theory. He proceeded by absorbing what all the pro traders had to say on the topic. And more than any other phrase that came out of their mouths was the phrase "price action." John was so appalled at himself that he could have kicked himself. "It was so obvious, I couldn't believe it."
When it comes to trading the forex market, John concluded that the trader has to take a decision between one of two ways to analyze the trade: either by using fundamental analysis or using technical analysis. Fundamental analysis takes into consideration all the psychological fundamentals that can influence a currency's change in the market. Things like the impact that the non-farm payroll numbers which are released once a month can influence the market, or how raising or lowering interest rates can impact a given currency pair.
When it comes to using technical analysis, this kind of trader surmises that opening up the indicator menu on their charting platform will in some way show them which currency pairs to trade based on how the indicators read. From John's point of view these traders seem to think that -- rather than understanding price movement -- paying attention to charts full with lagging indicators such as RSI, MACD, and stochastics will guide them to the right trade to make. After surviving years of losing trades following this same formula, John is persuaded that following this path is a losing cause.
The one technical indicator that most unsuccessful modern traders don't use is price action. They're all expecting all their other indicators to match up. For this kind of trader, the only important thing is what his static indicators are showing him, and price becomes secondary or even irrelevant. The only thing wrong with using lagging indicators such as these is that they do not furnish the trader a clear picture of what the market is essentially doing during a given trading period.
When, for instance, you train yourself to begin contemplating price support and resistance levels, you are seeing actual statistics which are influencing the direction of the market. No lagging indicator is ever going to give you that kind of information which will last for very long. You have to be able to see it immediately from the market itself. This is what John is trying to hammer home in his forex trading program Trading in the Buff.
The name of his method references the removing of indicator based strategies and returning to fundamental price action indicators. Put another way, trading in the buff, without using the theoretical indicator window dressing that many traders are conditioned to base their trading habits on. The theories sound good, but they don't always work.