I’ve been working on my edge, but what is it?

What I do now is limited to (1) finishing my home improvement self-build and (2) trading. My trading manages to sneak in for an hour or so each morning, with the occasional longer session if we cannot build due to weather or materials. I also get at least an hour to review the day’s chart in the evenings.

It is better than it sounds. The limited trading time allowed has forced me to review my trading more carefully and has naturally left more time between the brief trading sessions to think.

Has my trading come on over the last few months? It is challenging to say to what extent.

Of course, in trading, we have results via multiples of trade statistics and the great leveller—profitability. But even that is not the whole picture. As I’ve tweaked my trading process, I’ve had to stand still or go back slightly, waiting for my required new skill level to catch up.

Intraday derivatives trading is competitive and fast-paced. We can, however, get masterful at a low timeframe in specific areas. That is where I find my edge resides. When I say timeframes, I’ve previously traded the 5-minute chart feeling that the one minute was far too quick.

But through persistence, I moved to the one-minute chart as my trading timeframe using the 15-second chart as my lowest timeframe entry qualifier—so ridiculously quick that I stopped doing it several times and reverted to a more pleasant pace.

Today my trading timeframe is the 100-tick chart (I still have a one-minute view as a trailing stop reference which now feels sedate in comparison), and my entry prompt is a 9-tick chart. (As an aside, such a quick charting timeframe is not widely available, and some traders will think they have a nine tick selected when they have one decimal place of disparity and are trading at 90 ticks).

But coming down to such a low entry timeframe is only meaningful with an edge. An edge is specific but within a culmination of things that define a necessary skill level.

What is an edge?

“You only have a trading edge if you’ve traded a specific strategy hundreds of times to prove it has a positive expectancy. In other words, your edge makes you money over a meaningful sample size of trades”. (Adam Fiske)
“We have an edge when we can see where the price is being accepted and rejected”. (JJ vwaptrader1)

I like the combination of the above definitions of edge. But (and a take on Jack Schwager’s saying) you need to know your edge to have one. And your edge must fit your timeframe; importantly, it must work for you.

As Adam H Grimes says: “Good things happen when a trader, who is at the right stage of maturity, finds a system that fits him like a glove”.

In addition to a shallow timeframe entry, I also like to refer to the volume profile on a 30-minute chart and a session VWAP indicator. It sounds complicated, but as Brian Shannon recently said, reviewing his new book, “(remember) simplicity is the market’s greatest disguise”.

Talk soon. Buzz

Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.