The EDGE of a trader - Page 101
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Thread: The EDGE of a trader

  1. #1
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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 07:40 PM.

  2. #1001
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    Quote Originally Posted by geddam View Post
    Knowledge and understanding is the main thing that will help us to take care of all the factors needed to succeed in Forex. Knowledge is the power because it helps us to trade with more focus on quality. So we should make our trading of good quality by better understanding and avoid over trading. Daily target can avoid us from overtrading.
    Experience is the potential way for all to generate each and every kind of trading skills. Everyone of us who are trading have to prove our skills in trading. This business of Forex is not going to give money easy to anyone. Most important is we must have strategies which must be backtested and have good money management.

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  3. #1002
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    Quote Originally Posted by Deepika View Post
    Experience is the potential way for all to generate each and every kind of trading skills. Everyone of us who are trading have to prove our skills in trading. This business of Forex is not going to give money easy to anyone. Most important is we must have strategies which must be backtested and have good money management.
    Experience trully will be the most important thing like our life in trading. They will help us to get a better knowledge too and we can trade with high precision as long we got more and more experience. Traders without experience will not last for too long in this business and eventually they need to face heavy losses.

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  4. #1003
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    Quote Originally Posted by sekiryutei View Post
    Experience trully will be the most important thing like our life in trading. They will help us to get a better knowledge too and we can trade with high precision as long we got more and more experience. Traders without experience will not last for too long in this business and eventually they need to face heavy losses.
    Experience will be one thing we will be needing in here but traders without a good knowledge will not learn anything from the trading experience. Some trader really have a lot of histories in trading and backgrounds as well but they just can't make any good result because their knowledge is wrong so they have the wrong concept in trading.

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  5. #1004
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    Quote Originally Posted by Yul View Post
    Experience will be one thing we will be needing in here but traders without a good knowledge will not learn anything from the trading experience. Some trader really have a lot of histories in trading and backgrounds as well but they just can't make any good result because their knowledge is wrong so they have the wrong concept in trading.
    I believe experience gives knowledge and also a good mindset to trade. Also I believe those who have strong mindset will have an edge in the market. mindset is the vital thing, without a well developed mindset no one can get success. Without good mindset trader cannot face the risk in trading.

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  6. #1005
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    Quote Originally Posted by silentsaumya View Post
    I believe experience gives knowledge and also a good mindset to trade. Also I believe those who have strong mindset will have an edge in the market. mindset is the vital thing, without a well developed mindset no one can get success. Without good mindset trader cannot face the risk in trading.
    It is true and i agree with you. If we got the experience then clearly we will be able to possess a good mindset and perform with a better result. Traders just need to know and realize too that not many trader are good in here especially in money making. That is why we need to at the very least possess a good mind and calm mind to trade.

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  7. #1006
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    Quote Originally Posted by silentsaumya View Post
    I believe experience gives knowledge and also a good mindset to trade. Also I believe those who have strong mindset will have an edge in the market. mindset is the vital thing, without a well developed mindset no one can get success. Without good mindset trader cannot face the risk in trading.
    What traders firstly and really need is to acquire the right knowledge about the market, this will help such trader to be well informed and know the way to tackle the market boldly. This is what I can tag the edge that any trader needs before a success can come. And traders should take the training times very seriously, because that is really the building time of any trader.

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  8. #1007
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    Quote Originally Posted by Yul View Post
    Experience will be one thing we will be needing in here but traders without a good knowledge will not learn anything from the trading experience. Some trader really have a lot of histories in trading and backgrounds as well but they just can't make any good result because their knowledge is wrong so they have the wrong concept in trading.
    I have really now know the value of experience that is the reason why I am taking trading seriously as I have learned a lot about it already, I know that I can make good amount of money from the market, with that been said I want to really take the business seriously to see that I gain more trading skills and knowledge to succeed in the business.

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  9. #1008
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    Quote Originally Posted by cozard007 View Post
    What traders firstly and really need is to acquire the right knowledge about the market, this will help such trader to be well informed and know the way to tackle the market boldly. This is what I can tag the edge that any trader needs before a success can come. And traders should take the training times very seriously, because that is really the building time of any trader.
    Yes sir, that is really what every trader will need at first, but we should think further in this regard, all traders can not be successful even if they have the right knowledge. The reason is simple, not all traders apply things in the same way, and this will surely be affecting what they are doing always.

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  10. #1009
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    Quote Originally Posted by cozard007 View Post
    Yes sir, that is really what every trader will need at first, but we should think further in this regard, all traders can not be successful even if they have the right knowledge. The reason is simple, not all traders apply things in the same way, and this will surely be affecting what they are doing always.
    Knowledge is very powerful but not the sole requirement to succeed in Forex. The main edge in trading is the mindset because it is the energy which makes it possible to apply all plans and strategies effectively. When we have skills and when we also can apply those skills we already are at the edge of trading. But this is a long process.

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  11. #1010
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    Not all strategy are good most of the trading strategy have an edge that's why most of the strategy never work, it is true everyone want to choose a good strategy but they really fail to ask if the strategy have an edge, when a strategy have an edge it will be hard for us to make stable income with it, so before choosing a strategy make sure you find out if it have an edge or not.

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