An edge is simply the totality of all the things that allows me to make better overall decisions than the counterparties on the other side of my trades. The totality does not include superior technology, access to faster data, insider knowledge of fundamentals, advanced math skills, or personal connections. It does include a complete and detailed understanding of the market I trade, a method I've refined through many iterations that I love and trust, years and years of successful experience and the knowledge and skills attained over that period, a calm mind supported by a well-ordered personal life and a detachment to the money in my account. A fresh fish who decides to swim in the same pond doesn't stand a chance. No amount of books, courses, seminars, or therapy with a trading shrink is going to change that.
An edge is an opportunity to exploit abnormal returns over a certain period of time. It’s not to be confused with luck.
Yes, and the market becomes non-random when it is trending, as greed and fear move the market way beyond its "true" value.
Agree. There is a bias but still some kind of randomness (Variance) around it. It can move +1 in average but like this : -4 +5 -2 +4 -3 +6 (Which is random)
I understand. My edge is my trading plan and my ability to follow the plan. Both are integral in my success. Without a plan I wouldn't know what to do. Without the discipline to follow the plan, I wouldn't know if problems were caused by the plan or the trader.
deaddog, You talk alot about a trading plan. 1. What is your best resource for developing a trading plan? I want to make sure my trading plan is well organized.
I'm not sure. It depends on what your trading and why. I first developed a plan because I read that one of the reasons traders fail was lack of a written plan. How many times have you heard; "Plan your trade and trade your plan"? Google SMART plan. That is where I started. I then wrote what I call my traders operating manual. I tried to write it simple enough that anyone could pick it up and follow the instructions. It's a series of If/Then scenarios. If this happens /Then the trader will do this. What I thought would be a couple hour exercise turned into a couple weeks. It's a work in progress. Questions you should answer; Why am I trading What are my Goals; Are they reasonable? How am I going to achieve those goals. (This includes what you are trading, where you are trading, your hardware, your system, broker, capital, backup, data provider etc.) How do I measure if I'm on plan. There are probably trading plan templates available, you can check them then adapt them to what you need.