How To Trade With An Edge

Trading is indeed a probability endeavor. Certainty is an elusive concept that has very little relevance in the trading process or in anything in life. In fact, certainty can be highly problematic as it fosters impulsivity, false assumptions and a lack of clarity and can greatly reduce the reliability of information, if the filter used to evaluate the information is unduly weighted by thinking that you can predict an outcome. It is much better to embrace the uncertainty and ground yourself in maintaining consistency in your methods and ensuring that you are measuring, verifying and documenting the data gleaned from this process.

Now, in case you are thinking that having an edge is a complicated notion fraught with a lot of moving parts and difficult to implement; let me assure you, that would be an incorrect assumption. To be clear, an edge can be very complicated, but most in trading are straight forward behaviors that will go a long way to supporting the high probability trade. One example is Online Trading Academy’s Core Strategy class and using it to determine those variables that contribute to placing the high probability trade. Things like using the placement on the curve to determine direction or using the Odds Enhancer tool to get an objective assessment as to what the probability is likely to be.

The purpose of this article is not to outline the specifics of any particular edge but to make an argument for ensuring that you have an edge to your trading. One of the ways to illustrate that is to consider flipping a coin that has been weighted thus providing an advantage to the heads or tails side. Even if you knew what side was weighted, could you predict exactly which side would come up when the coin was flipped? No, you would not and could not because the weight does not offer the ability to predict when either coin side will appear, only that each side will appear. The advantage is in the percentage of times that the weighted side will show.

Otherwise, with a normal coin and given a large enough statistical sample (say a million flips ) the percentage of heads vs. tails will be 50% for each. However, the statistics become skewed when the weighted coin is flipped. One item that must be considered is the importance of consistency. In other words, the edge that your trading strategy holds must be continuously targeted and implemented so that over a significant number of trades you will experience a higher percentage of hits. But, if you are inconsistent in the implementation of your rules and strategy, then your edge has become compromised. You must implement your strategy edge methodically and consistently without erratic departures from the strategy. Therein rests the power of the edge.