My dear brothers...OBTAINING AN EDGE

N

neo_hr

OK guys, my dearest trading brethren as some of you would say :)

you may know that I have been trading for awhile, made some lost some... My problem isnt how STOCKBROKKER put it making it to the million dollar club, im like light years away from that but rather AN EDGE!

HOW DO YOU OBTAIN ONE??? I have seen many threads on this board come and go named Trading systems or something similar but none has stayed arround long enough for us true beginners to benefit from them. All of this talk comes down to psychology, know yourself, know your markets, yadda yadda yadda...

Im not saying that this isnt probably the true core of trading, but only you more experienced guys that have made it through your learning curve can really grasp its true meaning. I NEED AN EDGE: Of course, it would be rather idiotic of me to say Oh, Candle, got an edge to spare? Course not, but would it be ok to ask for some of the simple (working or not) systems with somewhat detailed descriptions just for us to see what USED to work and why t worked and what could be done to make it work again?

I for example have used ENSIGNs SimBroker feature (basically it simulates e mini movement in realtime and you can place orders and stuff...), tried a few simple concepts only to get my head handed to me...

1, 3, 15 min chart S&R lines BBs to measure the extent of the move and I tried adding stochs/CCI (10) but I removed it as I found no use in it.What I watched for were some really basic things like short under 20EMA (middle BB), long above, short when stoch overbought etc etc etc... I even paid attention to outside BB closes since I read somewhere that only 5% close outside of BBs...

RESULT? -10k $ more or less... Mind you, I started with 1 contract but hrm... got a little frustrated so I shorted like 10 contracts at one time and yeah, blew it!

So, id MORE THAT APPRECIATE IT if someone would show a brother some light in the fiery pits of the market.

Thank you all and trade better than me, may the candlesticks be with you! :D
 
Couple of suggestions.
Please note that I do not usually trade the minis, I only use them for fast entry into breakouts or breakdowns. I trade mostly listed stocks, and use the minis as a leading indicator

Try getting a audio feed , a squawk box from the floor of the CME, and pay special attention to what the "locals" are doing, and to the level and type of background noise (shouting, cheering and so on)

I use 20, 60, 200 EMAs on any time frame, the larger the frame, the larger the money in play is.

Calculate daily and maybe even weekly Pivot points (H+L+C)/3
and the supports and resistence points, Don't forget the mid-points they sometimes give you a safe entry in a pullback.

Watch the sectors and the strongest stocks in each sector.
For instance in the NAZ minis, if it kinda hard for the Naz to make a breakout if the SOX is extremelly weak

Pay special attention to multiple day chart formations, i.e. Double top and bottoms, H&S, and so on.

IMHO

RandomWalker
 
An edge or a belief in a trading system is very important. I have been using my own prop. trading system for years. It took many hours of back-testing and finally getting displined enough to trade every signal. I use it as the basis for trading stocks long or short overnite and I use it to trade the e-mini's. If I were to teach this system to a group of traders I would ask for a 6 figure fee. But I will give you a clue to find the foundation of this system. I found this info in a book by Gerald Appel. I think the book had a title like Trading Systems in it. I found it back in 1996-7 in my local library. Another clue is it listed certain market indicators and the probability of the next days direction. I think that is more than enough clues, especially since most traders who have developed an edge, spent many hours and who knows how much in trading capital to refine and test it.

One thing every trader must do is always believe in their edge and trade every signal ....no exceptions.....you could do less size but you must trade every signal you never know. And I think thats the biggest down fall of a trader...I could give you this edge but you know what? as soon as it goes into a draw down phase you would likely abandon it and their goes your edge. I hope this puts you in a better position to developed an edge.
 
I have been trading for 5 years, everyday for 5 years. Trading is my main source of income and has been since I devoted my full attention to it 5 years ago. I started trading stocks and options and now trade the futures. ( e-mini naz ) I have been trading them for 9 months in addition to trading the QQQ since its inception, while I was trading stocks it was in the basket of stocks I traded. I have an average monthly return over that time period of 20%. All this is to say I know what I am doing. At least most of the time.

Every new trader is looking for an EDGE, a HOLY GRAIL, a SYSTEM, or something that allows them to relax and just trade using this "system" and slowly but surely get rich.

Let me offer a few insights ( hopefully helpful ):

1. Learn the markets. Understand some fundamentals, the economy, interest rates, technical analysis, earnings reports ect.
While you may use only a small portion of this info to actually trade, knowing as much as you can about the entire market will add to your confidence in using what ever you do to trade.

2. Put everything in writing. When you find a system or methodology, ( better term ) write it out, backtest it, paper trade it, and trust it ( most important ) if it works. Understand probability and risk management and how it relates to your methodology. Start a journal, keep accurate daily records, and see how your actual trading equates to your written methodology.

3. Know yourself. Understand your own personality and if the methods you are trading fit the kind of mental make-up you have. If you are a conservative person in most aspects of your life then don't attempt to trade in a volatile market, for example.

Basically what I am saying is become knowledgeable about the stock market in general, know yourself and what kind of person you are. Develop a plan that fits you, write out a plan that includes your trading methodology, be ferocious in your discipline and risk management, and work tirelessly to perfect your trading methodology. THIS IS YOUR EDGE!!!! WHY? Because most traders are not willing to do all of this to perfect their craft. I work between 10-14 hours a day, 7 days a week immersing myself in the market and perfecting my skills and after 5 years I am good but I would still like to improve and I strive to do so.

Here is my EDGE, if this is what you are looking for. I will detail specifics but I will offer an idea of what I think an EDGE is.

I trade based on technical analysis, using moving averages and candlestick charts. No indicators, RSI, MACD, money flow ect although I implement some stochastics on short term charts for entry/exit purposes. I study chart formations, bull/bearflags, volatility coils, price breakouts, double bottoms and support/resistance price clusters. Then, using moving average relationships I apply probabilities to each trade. I use basically the same stop, same target, and same size for all trades making small adjustments in certain cases based on potential or market situation. I have patience and discipline, attempt to use proper risk/reward ratios, and a strong trust in my "system".

All this to say, my EDGE is my knowledge of the markets and of myself, my discipline and patience along with tireless development of my trading methodology. Trading systems change with each market, trading methodology is something you can develop and tweak and keep in a general form for your entire career.

Hope this helps.

---------------------------------------------------
" Plans are nothing, planning is everything"
---D. Eisenhower

AllenZ
 
neo_hr, the reason it always come down to psychology and yada yada as you say is because that's what it takes.

market is perception. it is not real. traders trade their perception of the market, not the market itself. .. well here we go again. lol

trading is very easy. entry is very easy. exit is a little more complicated. but the reason traders fail, you said it yourself above : panic, stupid move = blew it.
so you see, it is about psychology.

don't get me wrong. psychology is not what will make you profitable in the market. an edge will. but psychology is what will make you fail.
subtle difference but crucial.

you also need the right psychology to go through the process of learning before you get the edge.

two more points : why would fellow traders just tell you how they do it so you don't have to search for yourself ?
well.. although I don't see why, several did on this forum (actually I did too).
second point, even when a pro trains you, it takes month to get it. so it is not a few threads on this forum which will make it for you. it is hard work.
the kind of hard work you do is good : simulation placing trade. that's good. you don't succeed right now, but it is a success. most people would try for real and loose real money (if you don't make it in a simulator, forget about real trading).

it just takes time brother. very long time.
and the pity is usually, books and web sites will put you on the wrong track of all kind of indicators or I don't know what bulls*t.
The strategies which make money are usually very simple in concept (again, some are very very detailed on this very site).
if you insist on indicator stuff (I do use indicators too, but trading is not about them, that's all), why dont you get wealth-lab.. well, you use ensign which is very good too. so just register free on wealth lab and read the code of pretty good strategies. there are all very detailed (since the code is provided !).
some even has an edge of some sort. what they miss is position sizing, but you must work this out yourself.

you need an edge, it's true. however it takes psychology to find the edge which works for you and later to apply it consistently. you just can't segregate the two.
Getting an edge with emini is a little harder than other instruments I think, because you of the leverage private traders are forced to take too much risk or to be stopped out too often. but I remember you have limited capital so stocks are a problem. anyway, until you make it on simulator don't go out and loose your hard earned money.

tntneo
 
allen nailed it pretty good. I posted before I could read his post. good post indeed.
totally my experience too. although I got back to stocks recently as a surrogate specialist (as don would put it). so much more enjoyable than the tense emini trading (for me anyway).

good post allen.
tntneo
 
allenz hit the nail on the head. an edge has to be developed by each trader individually. traders have differently styles, different personalities, hence different edges.

if your currently sim-trading the e-minis just keep doing it. to develop your edge, you have to do a thorough trade review. identify your errors and try to elminate them (VERY hard to do, it's easy to say don't fight the trend but fading is so easy) but also focus on why your winning trades were winners. in developing an edge examining your winning trades may be more important. the reason i say that is because your winning trades should start having a common theme, your "trading system", and that will become your edge.

i think it is all about DEVELOPING an edge NOT obtaining one.

comments?
 
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