Finding an Edge

[tomorton]

LUCKY FELLOW I WASTED 10 YEARS ON THAT BS

I seriously recommend reading as few books as possible on trading. I'd suggest one book on each of the following -
chart patterns - Thomas Bulkowski / John Murphy
candlestick patterns - Thomas Bulkowski / Steve Nison
trading psychology - Mark Douglas
example strategies - Linda Bradford Raschke / Mike Covel / Mark Fisher / Alan Farley

Nothing on indicators, statistics, probability theory, advanced psychology, company accounting, how Warren Buffet got rich, very little by any college professor, nothing on the fundamentals of sovereign currencies or central bank procedures.

 

[comagnum]

Novices think an edge is found in entry signals. Seasoned/profitable traders know the edge lies in the sum parts of the traders psychology and trade/risk mgmt.

 

[treeman]

Agreed. But then there are trend changes and no-trend times. How to do about those?

Trader longer time frames.

 

[IAlwaysWin]

why do markets trend? because that is the easiest thing to do : to change the trend is too difficult so follow the line of least resistance;everyone does that!

I completely disagree with following the end of a trend. The trick is being able to catch the very beginning of a trend or learning to not be reliant on following the pack.

 

[IAlwaysWin]

It always amazes me how a price can rise/fall with little volume. One observation is it falls faster.

Es

When big players are moving money around you'll see jumps in price with little volume

 

[dozu888]

there is not 'an edge', but there is 'the edge', which is the trader himself.

'an edge' can erode. 'the edge' means you read market well as a discretionary, or you program well as a systematic.

see my 'trading is easy' thread, an example of how you get an edge.

 

[dozu888]

trend-following is a pattern, it's NOT an edge.

check CTA performance in recent years.. no edge there anymore.... that's what I meant by 'an edge will erode'.

 

[treeman]

trend-following is a pattern, it's NOT an edge.

check CTA performance in recent years.. no edge there anymore.... that's what I meant by 'an edge will erode'.

I'd contend that your buy and hold the NAZ is trend following.

 

[EsKiller]

When this question is asked, its normally when a novice trader has a little bit of knowledge, nut not enough to know how to create a workable strategy.

As someone that's traded successfully for years, the most beneficial thing you can do is to stop looking for edge. Instead, pick an instrument you are interested in trading and study how price moves within the instrument for 2 hours a day for at least a year. Break down the bars bar by bar as each tells a story. Use logical reasoning to determine why these bars form the way they do. Why is important. Once you understand how each bar reacts and why in different areas of a chart, you have enough information to begin to create edge.

 

[El OchoCinco]

Edge... is basically whether or not you have mastered the art of reading price action on a chart to day trade futures/stocks/currencies; or mastered analyzing volatility to trade derivatives.

It is not some secret sauce, it is just hard work, effort and vision.