What is an edge?  

 

Trading is about probabilities. We will have profitable and losing trades, and the sequence of winners and losers is completely randomised. But if we know that the probabilities are in our favour, over a period of time, we will make money – this means we have created an edge. There is a great book by Mark Douglas – Trading in the Zone – which illustrates this perfectly. 

 

Creating an edge:  

 

This will look different for each trader. Each individual trader will have a unique trading personality and risk profile. What instruments will you trade? What time frames? What will your risk be? These are just some of the details you will need to decide upon when creating your edge – it will take time to develop this based on your own trading style and performance. 

 

Follow that plan:  

 

This sounds like the simplest part of your trading journey, but it’s the one with which most would-be traders struggle. A lot of trading requires counter-intuitive thinking and goes against all of our natural human instincts. For example, having the conviction and the confidence to take the next trade with exactly the same parameters and risk when you have lost five in a row is more difficult than it sounds, as you will have to counter all of your natural human emotions. These are a part of our make-up – you cannot eradicate them – so you have to learn the methods and skills to make sure they do not consume you and control your trading decisions. 

 

These conversations are much too in-depth to discuss here today, but please keep an eye out on social media for content that will delve deeper into these concepts and break them down further.