So how does one find this so called edge? Do you sit around looking at charts until you get an "AHA!" moment? I just don't get it anymore. Can a successful day trader confirm that trading is mostly managing your risk/reward correctly? Is it mostly about taking a small string of losses and then hitting a home run? I think a lot of members here post about being profitable but probably don't even trade.
Champion and ADX Trader make great points. I agree that # 1&2 prevent 3&4, but even successful traders who follow hard and fast rules (systems) will experience a string of losses. It's the nature of the beast. To prevent the strings of losses, but have lots of strings of winners, the approach is rules based, but tempered with experience. That's why I believe focusing on one market is so key. Trading sucess for me came when I realized that the market is engineered to have the most people wrong at turning points. Many big moves up come from too many shorts, the same for longs on moves down. On each move, a trader has to determine is it real or a shake out. The right answer delivers in spades.
In my opinion, EDGE is nothing more than understanding yourself and developing mental toughness to control your two primary emotions, fear and greed, which plague so many traders. That and risk management. One can make money consistently if these factors are successfully addressed...even without the best trading method. Of course, most people flame out because they can't "control" themselves.... Very hard thing to do for most....
I assure you I trade every day. It's a passion for me. Beginning traders come into the market thinking trading is easy. If they happen to hit a winner or two in the process, this belief becomes stronger. EventuallY they wipe out and either leave or refund the account. I have been there many times, so I know the drill. The pros count on a fresh string of newbies to donate their money and they are never ending. I donated a lot of money before I bacame successful. I can tell you trading stocks is not the way to learn. It requires a lot of money and many stocks have different DNA and act differently, so what works in one may not work in another. I recommend opening a small futures account and trading one contract (having stops so you don't get killed) and focusing on one market. It will take you some time and you willl become frustrated before hopefully becoming successful. If you are committed, eventually, it will begin to make sense. I firmly believe it was my belief I would be successful and the commitment to refund and try again. I recognize not everyone can do that, but you have a better chance at futures than stocks. As one market guru says: TRADING IS SIMPLE, BUT IT'S NOT EASY.
There's nothing like throwing real money into the market to find out what you are worth but trading on a simulator let's you know that you at least, "have a chance." I traded SIM for 2 months. Did 100% the first month, lost all of it the next month. That's when I knew I was ready. Give me $5,000 on January 1 and I will give you back $50,000 on Dec 31st. The reward in this business is well worth all the sacrifices that have to be made -- and there are many sacrifices!
Dax, an edge can come in the form of many different things. You can either have a psychological edge or a technical one, or both. It just means you have some sort of advantage over other traders. It can be something as simple as your interpretation of price movement. Part of the reason most traders fail is because they look for affirmation. They need to be a "part" of something and look for others to support their views. They do this by following a trend. By the time you realize there is a trend it is probably too late to profit from it. Take a step backwards and believe there is another way. You don't need a trend, you don't need patterns, you just have to have access to a window to the market that few people choose to look through. No, you don't need a trend to develop an edge. Simple price movement can be enough: http://www.elitetrader.com/vb/showthread.php?s=&threadid=112126
This thread is sure to bring out the pretenders. I personally know two people that make their living day trading and neither have ever heard of Elite Trader, nor do they want to. They're too busy trading. Must be a correlation there somewhere. :eek: