You have edge when:
you take uncrowded trades
that exploit price inefficiencies.
Markets are democratic. The majority determines fair price.
But sometimes price trades at a discount or premium to its fair price.
This can be due to…
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a trade that produces profits over a meaningful sample size is said to have edge.
Edge isn't discussed openly (firm traders sign NDA's) leading to broad misunderstanding. To use a card game analogy - you don't show your opponents your hand.
The benefit of intraday trading is arriving at meaningful sample sizes quickly. It's also a skill and experience fast track. It's why successful longer-term traders built their skills through intraday trading.
What edge isn't - when you have a range of trades that produce an overall positive outcome. No way of knowing what contributed to edge across different trades.
What's most important:
psychology?
money management?
or trading edge?*
*a trade that produces profits over meaningful sample size is said to have edge.
Listen:
If you haven't got edge
the best psychology and money management won't save you from losing money.
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What set up the first payout?
Sure the u̶n̶d̶e̶r̶ ̶N̶D̶A̶ trade paid
But what was the catalyst?
Here's your play:
The early move-up was a carbon copy of the prior day.
When trading a continuation of that move rewarded you.
But now
There's keen interest in a rinse-and-repeat long trade due to recency bias.
Yet there is a structural difference...
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Know the feeling?
When you're overwhelmed by trading?
It's a mental grip that depletes your confidence.
And calls for a way to reset.
Even though it's written to a Millennial
Obstacles are generation agnostic
So this note to a mentoree will work for you too…
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The yellow line in the chart below calculates weekly volume-weighted average price (WVWAP). The slope of WVWAP is trending up, as we would expect, given the massive upside gain this week. Generally, price trading above WVWAP as a signal to maintain long positions.
See how price price has broken below WVWAP, only to reverse back to the upside, as shown by the blue ellipses? What's this signalling to traders?
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As a serious trader your first step is to chunk down until you have a framework that brings order to your trading.
Think playing field and sports.
Within the field of play is when you can trade. Out-of-bounds is when you don't trade.
But it's not only about being in the field of play.
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The examples are clear. But unlike surfing both conditions hurt you. So screen time teaches you to recognise and avoid them. But perfect waves seldom occur in markets. As shown in the image below, markets are mostly a blend which makes when to trade ambiguous. Right?
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"I'm good at picking when the market turns so that makes me good at trading."
Says a struggling trader
Followed by:
"So I know I'll be profitable if I get help with my psychology."
Look
Even though you experience winning trades…
Ironic isn't it
You've experienced pain from
expected returns not met
being overwhelmed with "how to trade"
years of trading losses
courses that didn't help
minefields of analysis, tools & indicators
"Holy grails" recommendations, poor advice
Yet:
when it comes to trading
pain pays…
Is your concern re developing trading?
You can only do so if you can allocate all your time.
Truth is
when you first commence professional trading
you don't have the "trading fitness" to trade 5-8 hours a day…
If your problem is:
over-trading
taking poor odds trades
feeling like you're going to lose when you put on a trade
Here's how to resolve it…