The EDGE of a trader
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    The EDGE of a trader

    Hi traders! Many traders want to pick a profitable strategy, but not too many traders ask a question - "does this strategy have an EDGE?". Ability to earn money in a short-term time perspective is not an edge itself, it's just a correspondence of your strategy and current market conditions.

    The best way to understand the concept of EDGE it is to remember how casinos make their profit. They generate significant deal flow from their clients - they force them to make more and more bets and eventually, casino earns money and its edge can be explained in a few words: limited payoff per stake and limited stake size. That's it. That's the edge. All they have is to generate enough turnover to realize that edge.

    Edge can be formulated in a very simple way - for example, it can be ability of the market to liquidate quickly when it has exceeding inventory, or it can be ability of the trend to keep going in the dominant direction rather than reverse. It should be very simple, it's not a strategy, it's a core principle that allows you to beat the average. All you have to do is to have more situations that provide you your edge - in other words, more markets and more setups that have those profitable (for your trading style) inefficencies.

    Why do you need decent turnover to realize your edge? What about "trade less to earn more" principle? Well, the fact is that overall predictibility of the market is relatively low, and even if you have "A"-class conditions for your trade, you have no guarantees of profitable outcome. The very next trade doesn't make sence in terms of final outcome. Next 100 or 1000 trades will definitely make sence.
    So, there are core principles that should be respected by trader:

    1. Trading is a marathon and final result can be calulated only on a series of trades.
    2. Edge or your core trading idea should be simple. You should have opportunity to find it on any market. The best trading edge is that relies on fundamental unchanged behavior of market participants (say, trendiness).
    3. To realize your edge, you want to have more what works. More markets and more good setups.

    For example, I formulate my edge in the following words:
    I use ability of the strong trend to have better odds of continuation, and trade against couter-trend short-term inventory. It means that in my trading first I have to define a trend, then to define exact entry point - for entry I tend to seek for exceeding inventory of counter-trend traders. Trend creates market conditions that will help price action to go further, entry point will provide me good timing for my trade and will help me to reduce risk.
    So, you see that trend plays sigificant part in my trading, that's why I want to have more currency pairs (and other instruments as CFDs) for better trade selection. Also, I like to trade liquid markets (mostly currencies), because overbought and oversold conditions occur pretty frequently on these markets. Combining trendiness with short-term market logic helps me to move forward in my trading.

    How would you formulate YOUR edge?

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    Last edited by Value trader; 03-26-2014 at 08:40 PM.

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    i love this words " 1. Trading is a marathon and final result can be calulated only on a series of trades. " yes, it is right, we do trading for longer time or lifetime, we want to build a great career, success and enjoy the life with the better one, and so, there is no instant way, we just need to keep learning and practicing .
    and it is wrong concept if some of us want to get it in a short time,in a night , and to be a good trader and success without sacrifice

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    Very nice article value trader sir I love your threads always its a great pleasure for me to read them I am agree with you a trader should know about his edge in forex a good edge in forex help a trader to know about his strength in this market and along with it we should check with our weak points also

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    Quote Originally Posted by Value trader View Post
    1. Trading is a marathon and final result can be calulated only on a series of trades.
    Considering trade like this is good for a trader. If a trader starts to calculate his success rate after each trade then after some consecutive losses he will be disappointed. But among our trades,it's must that some will be profitable and some won't be. The amount of profit/loss will also not be equal. I prefer to calculate net loss/profit over a month. For day traders they may calculate that weekly, but i won't suggest to calculate below this time range.

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    To me, it is the formality of the trader that is most importnat in the market. In the formation of real trading, it is better that you do it accurately the way that will limit the poer of the market and increase your onw trading expertise and power. All that is good for traders is lower riks and higher management of the trades.

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    that ia a wise thing to say no matter what was your trading style you should never forget to consider other things becaue the market is not stable and it need a lot of flexibility in order to be able to deal with all conditions that comes up in thw market

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    Quote Originally Posted by rinaji View Post
    As a long-term trader, of course I have a formula for long-term trading. But I can never be separated from simple logic. I am looking for a final condition of the trend, there is usually a consolidation phase before the market reversed. My main strength is based only on the margin calculation in my trading account and cash flow. That's it, just a simple way, I do not want to make it a hassle.
    be careful with the use of trading as it is sometimes when you try to fight the trend of price movement that occurs and the trend is still strong enough to take place, then you will be stuck with such market conditions but we recommend that you do a final denagn trade against the trend the trend for I advice you try to use strict money management so that if the trend continues you will still secure

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    This is very important and authentic article which bears important suggestion to me also. With my less knowledge and skill I failed to get the moral courage to put my comments on it rather than accepting it well and trying to maintain in my further trades. I like this forum very much where I can able to learn many new items.

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    Quote Originally Posted by newentry View Post
    i love this words " 1. Trading is a marathon and final result can be calulated only on a series of trades. " yes, it is right, we do trading for longer time or lifetime, we want to build a great career, success and enjoy the life with the better one, and so, there is no instant way, we just need to keep learning and practicing .
    and it is wrong concept if some of us want to get it in a short time,in a night , and to be a good trader and success without sacrifice
    yes forex trading is a marathon and not a sprint where the finish line is just a stretch ahead so all traders are surpossed to look at the long term goals in trading and hence should not be distracted by the darshing of the squirel which come in form of minor losses during trading

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    Quote Originally Posted by Jamuna View Post
    This is very important and authentic article which bears important suggestion to me also. With my less knowledge and skill I failed to get the moral courage to put my comments on it rather than accepting it well and trying to maintain in my further trades. I like this forum very much where I can able to learn many new items.
    You really think what you should be authentic at all it will not give good knowledge,suggestion by suggestion then you read it without saying a word it will make you just to be listener,create the new thing which is more like yourself,be what you imagine to create good strategy.

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    Finally successful traders

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