Listen for how to craft a compelling model of the market. Welcome to lesson four. My name is Sam ADA. I'm a global macro Currency Trader and the owner of FX renewed calm. This is the advanced forex course for smart traders. This tip outside the matrix you need to be aware of where its boundaries lie.
In the first two lessons of this course you learnt about your own beliefs and how they are different from the beliefs of top traders. And the third lesson you took a scientific approach to goal setting by uncovering your financial freedom number and redefining what financial freedom means to you. In this lesson, you continue your journey down the trading Rabbit Hole by creating a model of the Forex market they will use in future lessons to find your true edge as a trader. When you know how the markets wheels turn, you can direct your activities to the areas that you enjoy. And then once you can spot opportunity. This is different from the majority of traders who are blindly trading strategies or indicators outside of any sort of guiding framework.
What is a compelling model of the market? a compelling model of the market is an intuitive framework for what makes the markets tick. It is a big picture overview of what's going on what works and what doesn't. It would typically include by fundamental and technical information about the Forex markets. For example, you might consider how these things impact currency markets when you develop your models. This could be central bank and interest rates, support and resistance news announcement geopolitics, supply and demand chart pattern dealing ranges etc.
But this type of information you can start to make good and organized decisions that give you an edge over other market participants. Ray Dalio said we test that criteria to make sure they are timeless and universal. Your market models purpose when you are developing a model of the market. You want to keep in mind the reasons you need to have this model in place. The goal of having a model of the market is not an About being knowledgeable. It's about being practical.
You are looking to gain three things from your model one information to guide you on what to trade, to information to guide you on how to trade three information that will protect you from losses. Market wizard Carmen Shea said a great service quote is invest first, investigate later. You don't want to get fixated on needing a nice story for the trade. Trade what is in front of you. It is all well and good to have a compelling model of the market but is important to realize it is there to serve you. If for example, you have a view that sees risk everywhere that causes you to stay out of good trades, then your model is not serving you well.
Your model could even be right but if the market does not agree, then you could be lifted out on a limb. highly successful traders have a compelling model of the market but at the same time they're comfortable with the model being wrong. It is what is going on in front of them. That is important. Market wizard Jim Rogers said the biggest public fallacy is that the market is always right. The market is nearly always wrong, I can assure you of that.
The pieces of the puzzle. The forex trading landscape is like a giant jigsaw puzzle where not all the parts match. It's not one size fits all, either. A top trader has a model that is developed to fit their own personality and style. Despite this uniqueness, common elements. You can craft your model of the market by asking a series of questions.
These questions are included in the coursework for this lesson. As you go through the questions, just realize there's no requirement for you to go into detail on all of them just yet your market model will be a work in progress. For now you will only need to pick five or so questions to answer and I'm going to give you the first three for the others simply pick the two from the list that most interests you first, what trading strategies are likely to work in the current environment to what are your specific skills edges in three, what are your areas of interest? Once you've answered these three questions plus two more of your choice, your model of the Forex trading market will be sufficient to start formulating a comprehensive and winning forex trading plan. Over time, you can come back and add more. As a side note, it's important not to get over awed by this lesson and to keep it simple.
If you only want to answer the first three questions, that's okay. But you will need at least those to move on to the next lesson. Also, in the written version of this lesson, I'll give you some resources for crafting your model. Take the time to go through them and see which of them is going to fit you a blueprint for success. As you answer the model of the market questions you will notice that you start to have trading insights you can see how you use logic and intuition to choose to trade in a manner that simply makes sense. You will start to understand how and where to trade and notice areas of risk to avoid.
While it may be tempting to dive deep Built into this foundational information, you don't need to do it all at once, follow the kiss keep it simple, silly principle and do only what's necessary. robustness and simplicity far outweigh complexity when it comes to your trading strategy. In addition, you should not feel the need to read or watch the financial news every minute of the day. In fact, you'll be well served more often than not simply to turn it off. Instead, focus on developing your own compelling model of the market. So for now, I'll leave you with a basic task, get out your notepad answer.
The five questions I've asked won't take you long and you'll be glad you did. I'll see you in the next lesson.