Only trade when you can express your edge

You know, every once in a while a light bulb goes off and I realize that something really material has kind of slipped through the cracks among all my other ramblings…my five minute ramblings…and that is trading edge. You know, a person, whoever they are trading any instrument, any timeframe has to be able to have a trading edge. And it’s that trading edge that creates the alpha that has positive, expected value. And that makes all this activity worthwhile for you, either on an emotional and or financial basis. People are pleasure seekers. So normally what they do is something that brings them economic utility or pleasure. In this case, it could be money. So other people are masochists and they like to be victims and get everyone’s attention. So they do that by losing a lot of money or creating a lot of drama around this activity, because they constantly need attention. Eww…who needs those people?

So at any rate, I just like to remind everybody that you do need to express an edge. And that’s what I’m kind of speaking to. When I say that your trading style and the market might not be compatible at any particular at any particular time, at which case you want to stop. Because if what you do, your edge is nullified, then it makes no sense to trade. Good poker players have a tougher time at the table with a bunch of newbies who they don’t know. They can’t put a read on them just yet. So it takes a couple of turns around the table. If you’re at a nine handed table, it might take 27 or 36 hands to get a read on somebody, then they can deploy their edge. You see? So you have to be super careful about just trying to throw your money at something because you think you have a knack

From my experience, I’ll give you a specific example. Say you have a head and shoulders pattern up or down. That’s not necessarily an edge. Again, that’s knowing that three of a kind beat two pair trading that in your own unique way might be a way, might be a way to create a trading edge. It’s how uniquely you do something that other people might know how to do, but just don’t do for one, for one reason or another. And it’s when you can’t replicate that or execute that to your advantage then it’s time to sit on your hands because it would otherwise make no sense to put on risk.

If you didn’t have an edge, because then you can go back a couple of months to or whatever it was a month ago to that episode on the Wednesday where I said, what is the emotional payoff of each step? You want to make sure that the emotional payoff comes with you having discipline around your system with with which you’re compatible that has positive, expected value that you can execute in a market environment whereby you can express your edge. The minute you cannot express your edge is the minute where you have to close your doors and say we’re closed for the holidays or we’re going to come back. “Out to lunch. We’ll be back shortly.” And you put the little thingy clock in the window with the, with the red or orange hands.

This will also give you an idea of where is your level of maturity on a scale of one to 10. If you decide that you cannot determine how you are expressing your edge anymore, and you’re still putting on trades, you can understand that you’re doing it perhaps for some emotional benefit, not necessarily a financial one. So then on a scale of one, one to 10, you could say, are you acting like a teenager or are you acting like a, a mature business person. And this is all self discovery. There’s nothing wrong with it. You are who you are. It’s not good or bad. It is what it is. But you need to know this. This is very important information. It’s much more important than knowing the damn chart pattern because your behavior is what’s predictable, not the chart pattern.

Okay. Anyway, folks, please consider subscribing we’re on all the big platforms including YouTube, probably be adding some more content there. If you can take the second, take five minutes and leave a review please. You don’t have to make it War & Peace – just couple sentences on how you benefited from the show or how you think other folks can benefit. That would be helpful. And I’ve been paying it forward by giving away the audio book version of my book, The Inner Voice of Trading, which I wrote for FT Press back in 2011. Well, I actually wrote it before then – it was released in 2011.

You can get that for free. There’s no deal like it on the internet. It’s a $30 value. And it’s my journey on how I kind of had to fail my way to success. Pointing out, not and gloating about all my wins, because I certainly had them, but where I made a lot of mistakes and how you can learn from those mistakes. It’s a good gesture of humility, if you ask me anyway. I hope you’re doing well. Please keep your emails and your comments and your suggestions coming. because I don’t know everything. And my goal here is to create excellent content every day. Even if it’s only for five minutes, I don’t like wasting people’s time. And trust me when I tell you I’ve got better things to do than sit here in front of a Heil PR 40 and yak into a mic. I’m busy.

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