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Starter Technical Model

As amazed as I am at how many traders look for the magic model, system, or signal that will explain the markets, I am also stunned by the amount of experts willing to sell them their voodoo snake oil. First, I have said all along that traders need to build their own personal trading strategies; there are no “off-the-shelf” solutions. Second, I don't want my explanation of Forex to be lumped in with all the other get-rich-quick charlatans. That said, I know what it was like to look at a Forex screen and have no trading clarity. In the next sections, I will explain a basic trading strategy for scalping. This technique is well-known throughout the trading communities. It is not very complex or complicated, but good systems don't have to be. It will, however, provide a new Forex trader with the basic building blocks to begin developing their own trading systems. I believe that, with a few minor adjustments, this system can become profitable.

Early in my career, I worked with an Elliot Wave specialist and, after many losing systems, he convinced me that this was the best approach to the Forex market. So, I hit the books and studied and—before I was completely ready—began trading on this indicator. Let me rephrase: I traded over his shoulder, but I never really felt 100% confident about the rationale behind the system. I believe this happens to many new Forex traders. They search for a trading system and blindly execute trades on partial information and understanding. I'm sure you have guessed how this story ends. Whenever a trade would develop, I would look for confirmation from the guru—he would say it looked good and by the numbers they were good trades. But, I could never find traction with this model. More were losing bets than successful ones, but he would hit winning trade after winning trade. The difference (of course) was that, while utilizing the Elliot Wave method, he had developed his own unique system in which he was comfortable and understood the rationale behind the trade. Me? I was just trading blind.


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