I think the key psychological assets are: 1) an indestructible belief in the law of large numbers, and its corollary: "the outcome of the current trade doesn't matter the least, as long as it is perfectly executed according to my trading plan / system rules which has a positive expectancy". 2) an indestructible belief that one has done his/her homework, and that this trading plan / system has indeed the best edge the trader could come-up with. As a result, it is futile to try outsmart it on a trade by trade basis. A by-product of 1) PLUS 2) should then be the ability to remain disciplined and execute according to the plan. For me, automated trading is a big help wrt to execution according to the plan, as it allows me to literally walk-away from my desk when I feel uncomfortable with the current trade. Not that I interfere any more with my systems' trades, but I sometimes get so distracted by those uncomfortable trades that I can't do any useful work. Automated trading is also an edge in itself, as it frees-up my day-time for research & developing new systems.
Good points; not that an edge is limited to that Bruce Kovner disclosed part of his edge as '' low risk, diversify.. world info, world markets...'' Thats not my edge. I would much rather read about ,USA ,gold,silver ,BAC, C,LEH,BSCS, Long Term Capital, rather than than PIGS or socialists/Greece/grease Part of my edge that could be disclosed; patience, trends,long term trends...
Knowing when to get out of a position is my edge. It is the most important skill I have honed over my many years of trading.
This is only way. If you cannot find an edge with pattern recognition, then it does not exist. http://www.elitetrader.com/vb/showthread.php?s=&postid=2968698#post2968698 Not all methods work well. Some are simple curve-fits: http://www.elitetrader.com/vb/showthread.php?threadid=239129 http://www.elitetrader.com/vb/showthread.php?s=&threadid=230194&perpage=6&pagenumber=1
Logic man-- did you give up on the debate about tight stops? Im rather disappointed that there was no rebuttal to my AAPL example.... We were talking about having an edge which allows one to set tight stops... remember? Similar to my AAPL example that I provided a link on-- take a look at LNKD today... Price rises rapidly during the first 15 min bar of the open.... In the meantime to the left of the chart we see strong resistance from 5/18 where price drops violently from a high of $ 109.47...time at this level is minimal... a stop above the high of that day with an entry on the 3rd 5 min candle today that failed to make a new high after a large extended range candle and pierce of upper bb resulted in a drop of almost 3 1/2 points... Most interesting however is where price stops and reverses-- $ .04 above the pivot low from Friday! $ .04!!! Why didnt market makers not only take out the low... but drop drastically below the low??? Surely the MMs see the stops??? Of course not.... Setting a wide stop would've resulted in smaller position size and less profit. As mentioned before- restated-- u cant have your cake and eat it too... Placing stops below HOD/LOD are not amateur by any means...
I would suggest an edge is a trade setup that you use which over time if executed properly without revenge trading leads to profitable equity growth of your account without the risk of ruin. I include risk of ruin since some hedge funds do employ trade strategies that are profitable over many months, but like in the movie "Margin Call" do have the possibility of destroying their company if they don't identify changes in risk volatility, which can be compounded by laying off their risk managers at the wrong time. Also, even using hedging to reduce risk can lead to risk of ruin when you put a woman in charge who does not have intellectual skill set to understand the strategies being utilized as noted in the $ 3 billion loss of JP Morgan. The only reason that firm did not implode was that they were too big to fail.
The edge from trading is a combination of context and phsyche , it is not found in individual patterns ,set ups ,systems , methods .It is found as part of context and psyche , and in the ability to read intuitively.
Not wasting time ranting on message boards during a live market or the hour preceding the market open.
olix- you have already proven in your own thread re: day trading being a loser's game that you are missing the mark badly... Now you claim that having an edge has nothing to do with setups eh? Again-- I ask you-- have you failed miserably at day trading? Have you failed at trading in general that causes you to have such an attitude? Why do you disappear when presented with objective arguments refuting your thesis? You are an interesting character I must say... You need an education however in trading.
That thread was someone's journal and I didn't want to get bogged down in a tangential discussion. Anyway, I suggested to you that there is a better way to set initial stops. You don't want to follow up on my suggestion? That's fine with me. As for the persuasiveness of a couple cherry-picked examples, the less said the better.