"Edge" trading

L

learn&earn

So I've been traing for about 12 months now and it's been a rough road, but I'm still here and having a great time:D I feel like my money management has drastically improved and my P&L's are showing it. The probem I'm running into is that I don't have a clearly defined "edge" yet. I trade stocks that i consider overbought/oversold and I also trade the top 10 advance/declining stocks. Basically I'm a discretionary trader. I'm doing ok, but sometimes I feel like I'm placing random trades just because a stock is moving. This is not what professionals do. wan to be abl to improve my trading results, but it's difficult when I'm trading all the sectors. I do keep a detailed journal so that helps chart performance. I guess my question is how do I develop my "edge"? My only edge for the present is my MM which I'm very happy with. I feel like being a Discretionary trader will not get me to the level of trader I plan to be at. I want my methods to be more disciplined. How can I accomplish this? Thanks in advance.
 
you will get simply gain it wth experience mate as you keep on trading.

one of the most imortant things in trading is patience,
and so everyday you trade and buildup more pateience you are becoming a more skillful trader.. :)
 
1) Money management, by itself, is not an edge.
2) If you're actually earning money over a large sample size of trades, then you must have some type of "edge". Your edge appears to be "good" discretion and some luck.
3) As long as you haven't had large drawdowns, you should be willing to increase your position size and keep on doing what you've been doing. Who says you have to change? :cool:
 
so the offical stance is keep doing what im doing and stay in the market? Seems like im just treading water if I can't improve upon what im presently doing. I want to keep growing and keep expanding my skills. maybe i'll try to size up a bit and go from there.
 
Quote from learn&earn:

So I've been traing for about 12 months now and it's been a rough road, but I'm still here and having a great time:D I feel like my money management has drastically improved and my P&L's are showing it. The probem I'm running into is that I don't have a clearly defined "edge" yet. I trade stocks that i consider overbought/oversold and I also trade the top 10 advance/declining stocks. Basically I'm a discretionary trader. I'm doing ok, but sometimes I feel like I'm placing random trades just because a stock is moving. This is not what professionals do. wan to be abl to improve my trading results, but it's difficult when I'm trading all the sectors. I do keep a detailed journal so that helps chart performance. I guess my question is how do I develop my "edge"? My only edge for the present is my MM which I'm very happy with. I feel like being a Discretionary trader will not get me to the level of trader I plan to be at. I want my methods to be more disciplined. How can I accomplish this? Thanks in advance.
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What is it exactly you think professionals do?


As far as improving your edge – here’s how…

Go look in the mirror; your true edge will be starring back at you… Focus on improving yourself, and you’ll improve your one “real” edge – I guarantee it


Read over your journal it should reveal specific areas to focus on


Take Care
 
You develop your edge thru trial and error, with some luck and persistence, you might discover an edge someday.

And no, money management and all that psycho babble isn't edge, an edge is a set of "rules" that traders use to time their entries and exits.
 
It seems that you have a need to formalize what you are doing. You don't necessarily have to do that. In my view, you must have a system of rules in place. But they cannot be too narrow or too many, because they will hamper your ability to evolve and adapt to changing market conditions. They must be very flexible, so that you can operate within their framework. And as long as you stick to those rules, you can do pretty much anything you want in the market, Soros thought of the market as a real-life laboratory where you learn by trial and error.

I think you should go back to the drawing board and find out what your basic trading principles are and what you firmly believe in. Then, ask yourself - is what you are currently doing in harmony with those basic principles.

When analyzing your "edge", I think you can substitute the word "edge" with the word "advantage". I think my "advantage" in the market is my ability to apply the basic principles of speculation (defined as early as 1902) and classic technical analysis in particular (formalized as early as 1932) in a disciplined way. Since classic TA is not proprietary information and it is widely used, it is not an advantage. However, because technical analysis (as well as fundamental analysis) is based on rules that are counter intuitive and go against basic human nature, it is your ability to follow these rules that can give the advantage. So your edge or advantage is your superior ability to follow the principles of technical analysis.

Many people here believe they have found some new rules and ways to exploit the market, which are not widely known and are not part of classic TA, so that gives them a special advantage or edge. Some people certainly have the experience and have observed and analyzed the market long enough to discover such proprietary methods, but I wouldn't make the search for such methods a core strategy. Sometimes you do find money on the street, but relying on such lucky occasions is generally not a good idea.

Another advantage can come from accumulating experience and observing and trading the market in real time. This will help you develop a better understanding how to apply the rules of classic TA as well as discover your own meta-rules, like when to trade a certain market, which markets to trade, etc. Experience and losses will also teach you what aspects of trading that you know and have read about, you are not applying correctly or ignore. The simplest example is that you have read about always having a stop, but you don't put stops from time to time. Or the need to diversify and not risk too much of your capital, but you sometimes want to play it big and do the trade of your lifetime :)

Experience will help you polish the rules you follow, but that is not something you can control, it just happens naturally (one thing to do is to keep records, but you are doing that). The one thing you can control is clearly define a broad set of general rules and principles and religiously follow them. Part of these rules is risk management, and it's a good thing that you have that in place.
 
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