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What Is the Source of Your Edge??


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What Is the Source of Your Edge??

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  #1 (permalink)
Legendary Market Wizard
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Out of curiosity, and to enliven the discussion here, I thought I would get the ball rolling on this one, and ask: what is (ARE) the source(S) of your edge? (assuming you have one)

One of the mistakes that I was making for a long time in my trading was not defining my edge. And I don't mean just technically. Defining a technical setup is an important part of trading, but only one part.

I sat down, and wrote down what made my trading work. I found that it was 5 things. When I traded with all 5 in place, I did well. When I didn't, my account suffered.

I want to share 2 of them here.

CONTEXTUALITY - understanding the market context, 'what the market / price is doing right now'. This is a must, and one of the reasons why trading just simple patterns won't make one rich. Context dictates if one's chosen trading method is the right one to use right now. I take trades only when the context favors my method. If I don't trade for several days or even couple of weeks, well, so be it.

CONSISTENCY - doing the same thing, day in and day out (in context, of course). Not changing my approach or strategy after having a couple of losing trades. Trading according to my plan without emotional involvement with the ups and downs of my P&L.

Well, this is a start. What are YOUR sources of edge?

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #2 (permalink)
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Extreme hard work and insurmountable patience.

Only those two helped me find my true edge.

I agree with your points too, but they can only be found after these two. Otherwise, forget about it. You're battling against robots everyday which are designed to take your money instead of giving it to you. So have patience and work hard.

BATMAN: There is always a way - you just have to find it.

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  #3 (permalink)
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This will be an interesting thread.

I think I look at the subject a little differently from the observations above: I see things like contextuality (not even certain I have that one!), consistency and patience more as being necessary for the successful exertion of my edge, rather than constituents accounting for its existence, and hard work similarly as well as having been essential to discover and develop it.

The edge itself, I think, comes from pattern recognition and the non-randomness of the markets, with observed price-movement parameters disclosing a greater than 50% probability that the price will move in a specified direction.

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  #4 (permalink)
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In my experience, my edge never arrived until I focused on my psychology:

I have a growth mindset
I'm never done learning, which is convenient as the market is never done teaching. And I know that I can always get better and, eventually, become elite in this or any other field. The preparation, practice, tinkering, replays and other work (and the passion for it) never stops because if it does, you're sunk. Look at many of the very successful floor traders who have resorted to selling eBooks because they didn't keep their skills sharp. If you stop growing, you will be left to history.

I have an internal locus of control
There is no "they," the market is not "out to get me," nobody is trying to "sweep my stops," etc. I own the trading decisions and accept responsibility for them. For example, If I entered a trade which put my stop loss in a place where liquidity is likely to be resting, that's my mistake and one I already know to avoid. I don't blame "they" for wanting to access that liquidity to fulfill their trading needs.

I engage in deliberate practice
When I make a mistake, I note it so that I can practice the scenario again dozens of times to ensure that, given the opportunity, I don't make that mistake again. I recall Michael Jordan noting that 25+ times he was entrusted with the game-winning shot and he missed it. His response? Go back and practice that exact shot again >100 times so that next time, his confidence is there and he is more likely to get it right.

I know that the next trade is the most important trade I'll ever take
I focus on the trade and setup now, not the trades that happened before or the trades I'll take later. There's a time for review, and that's when I review. But when I'm trading, I focus on the next trade exclusively. No distractions. In my experience, once you start dwelling or ruminating over the past, you're rattled and not fit to be in the arena with the world's best. Shut down, work on your head space, and come back the next day.

But most importantly...

I've learned how to accept losses and win with grace
I don't get upset over losses or excited over wins any more. I feel like the acceptance of losing is a huge part of the transition into being a winning trader. Instead, I celebrate good trades regardless of the outcome because the only thing I control is my own actions. If the opportunity is there, and I take it, and it was the right trade with the wrong outcome... that's not a loss. It's a learning opportunity and was one of the potential statistical outcomes that I accepted when I clicked the DOM.

Excited to read others' replies to this thread.

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  #5 (permalink)
Providence, Rhode Island
 
 
Posts: 2 since Oct 2019
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I had no edge until I came to terms with a couple things:

1. Even if I scouted a move perfectly and knew exactly what was gonna happen, it doesn't matter if I miss it. There will be another.

2. I'm really good at this one thing when trading a particular future, but I'm mediocre or poor when trading all these other things on all these other futures. It's real money so I think I'll play to my strength.

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  #6 (permalink)
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understanding and I.D. of the current market conditions and state on multi able time frames . using a filter across the time frames to I.D. trend and strength of trend . having key level I.D. and entry rules and proper risk management did not get the job done for me .

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  #7 (permalink)
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These qualities truly give any trader and EDGE. Thanks Tangy.


Tangy View Post
In my experience, my edge never arrived until I focused on my psychology:

I have a growth mindset
I'm never done learning, which is convenient as the market is never done teaching. And I know that I can always get better and, eventually, become elite in this or any other field. The preparation, practice, tinkering, replays and other work (and the passion for it) never stops because if it does, you're sunk. Look at many of the very successful floor traders who have resorted to selling eBooks because they didn't keep their skills sharp. If you stop growing, you will be left to history.

I have an internal locus of control
There is no "they," the market is not "out to get me," nobody is trying to "sweep my stops," etc. I own the trading decisions and accept responsibility for them. For example, If I entered a trade which put my stop loss in a place where liquidity is likely to be resting, that's my mistake and one I already know to avoid. I don't blame "they" for wanting to access that liquidity to fulfill their trading needs.

I engage in deliberate practice
When I make a mistake, I note it so that I can practice the scenario again dozens of times to ensure that, given the opportunity, I don't make that mistake again. I recall Michael Jordan noting that 25+ times he was entrusted with the game-winning shot and he missed it. His response? Go back and practice that exact shot again >100 times so that next time, his confidence is there and he is more likely to get it right.

I know that the next trade is the most important trade I'll ever take
I focus on the trade and setup now, not the trades that happened before or the trades I'll take later. There's a time for review, and that's when I review. But when I'm trading, I focus on the next trade exclusively. No distractions. In my experience, once you start dwelling or ruminating over the past, you're rattled and not fit to be in the arena with the world's best. Shut down, work on your head space, and come back the next day.

But most importantly...

I've learned how to accept losses and win with grace
I don't get upset over losses or excited over wins any more. I feel like the acceptance of losing is a huge part of the transition into being a winning trader. Instead, I celebrate good trades regardless of the outcome because the only thing I control is my own actions. If the opportunity is there, and I take it, and it was the right trade with the wrong outcome... that's not a loss. It's a learning opportunity and was one of the potential statistical outcomes that I accepted when I clicked the DOM.

Excited to read others' replies to this thread.


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  #8 (permalink)
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On top of the things already mentioned before, mine has been to absolutely love the market I知 trading. Personal example: I was always obsessed with the oil (and gas) industry. All the way from its history, Standard Oil, geopolitics, science/engineering innovation, the shale boom and bust, etc. So I skipped to CL when learning to trade futures. I知 glad that CL clicked because even sim trading ES with discipline was an infuriating experience.

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  #9 (permalink)
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QuantyQuant View Post
On top of the things already mentioned before, mine has been to absolutely love the market I知 trading. Personal example: I was always obsessed with the oil (and gas) industry. All the way from its history, Standard Oil, geopolitics, science/engineering innovation, the shale boom and bust, etc. So I skipped to CL when learning to trade futures. I知 glad that CL clicked because even sim trading ES with discipline was an infuriating experience.

Great point, and not just about trading.

Has anyone really succeeded at anything without really loving it?

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #10 (permalink)
Palm Harbor, Florida/USA
 
Experience: Intermediate
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QuantyQuant View Post
On top of the things already mentioned before, mine has been to absolutely love the market I知 trading. Personal example: I was always obsessed with the oil (and gas) industry. All the way from its history, Standard Oil, geopolitics, science/engineering innovation, the shale boom and bust, etc. So I skipped to CL when learning to trade futures. I知 glad that CL clicked because even sim trading ES with discipline was an infuriating experience.

I know what you mean. For years I have been working on profitable strategies for the ES with no success. Finally I tried a trend strategy I was developing, which had failed on the S&P, on NASDAQ futures instead, and the strategy moved from frustratingly unsuccessful to very successful. Just changing instruments made a huge difference.

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