Developing an edge in trading…and why I love day trading

What is an edge in trading? Most traders refer to “edge” as a method that is sophisticated, unknown and kept as a secret. Well, I have a different definition as to what edge is.

Let me use an example: If I gave my method to you, would you be successful? I wish I could say with certainty yes, but I am not sure. Would you apply this system consistently and remove your emotions from it. So the real edge that you might have is controlling your emotions. This is your number one edge.
You know already how important it is to stay emotionless when you trade, but you also have to find a system that matches your personality, otherwise you will break away from it sooner or later with your emotions. This is your edge two.
Would you trade a system that gives you $10K a month? Sure, right? Would you trade the same system if during the month it could be down 20K? Not sure, right?

This is why most traders don’t succeed; they don’t have a system that matches their personality.
When I build a system for myself “At the Open”, I was looking for these components:
1) Day trading system, not swing and not long term – I wanted to get out of the markets daily and take profits daily. I don’t believe in long term, as there are “violent” reversals to long term positions.
2) I wanted to take reasonable profit and take it as fast as I can.
3) Have a reasonable risk to reward ratio. I am willing to risk sometimes more per trade ( 5 points) to get 2 points, but I know that my probability for profit is higher (about 75%)
4) A system that has a VERY low number of transactions to finish early and save on commissions.

Finding a system that fits your personality is the real winner.
Fear is an emotion that makes us skip perfectly legitimate trades, greed keeps us in good trades for too long, and hope keeps us in bad trades we know we should not be in.. And you apply it all when you don’t have an edge.
Check out my system, it might be what the “Doctor Ordered”

John Paul

Leave a Reply

All fields are required. Your email address will not be published.