Home Trading Strategies How to Find An Edge in the Markets (Proven Method)

How to Find An Edge in the Markets (Proven Method)

77
0
How to Find An Edge in the Markets (Proven Method)

Hey hey what’s up my friend so in today’s episode I want to talk about how do you find an H in the markets so what is the nature right an H is something right that you do repeatedly right they use a positive outcome they use a positive expectancy and this is one of the biggest issue right traders face view is that they are trading without a niche it’s not easy to find a niche in the markets I’ll be honest because the markets are quite close to being efficient but if you work at it if you put in effort right yes you can find a niche in the markets and I’m going to share with you two all right techniques that you can use today to find your each so the first technique is for discretionary traders discretionary traders it means that you trade off using support/resistance Candlestick patterns trendline etc something that includes an element of subjectivity it’s classified under discretionary trading and as a discretionary trader here’s what you want to do first thing first you need to have some experience in markets you have to identify certain patterns and market that you realize that you know whenever this pattern occurs right there’s a higher probability of this happening so you need to identify certain patterns in the market and then you need to quantify the pattern and find out whether it actually works or not so the first thing that you wanna do is let’s say you identify a certain pattern of behavior in the market you want to develop a trading plan right around that pattern that’s the first thing so developing a trading plan what does it mean it means right now you have to so-called quantify that pattern right under what market conditions right would you trade a pattern right what is the exact entry criteria when trading the pattern where you set your stop loss which markets do you trade how will you manage your trade if it you know moves in your favor using a fixed target profit using a trailing stop loss right so all this questions right will go into your trading plan to so-called exploit the pattern that you have potentially fine right and to see whether you know it works or not so that’s the first thing right developing a trading plan around the pattern that you have identified second thing you must write execute those traits according to your trading plan right this means you have once your feels called quantify the pattern you have to trade it in the markets according to the whatever rules that you have set for yourself executing your traits consistently and this means that you can TV right you can like let’s see you’re trading the break out of TV a high but first five trades you trade break out of 50 D highs the next six seven eight traits you treat the break out of 250 D high no it’s not what it means right you have to stick to the rules that you’ve given yourself if not you’ll just be full by the law of large numbers right so stick to your traits execute it consistently right and execute a minimum of a hundred traits right to get a decent sample size the third thing that you want to do is to record your trades right journal them down right you know your your entries your exits right how much potential profit you I mean how much profit you make right what’s your risk reward ratio write all this down and journal down your trade and finally the fourth thing you want to do is to review your traits right once you have a sample size of hundred traits right you can find out whether you know this pattern actually works or not what is the wind rate right what’s the average risk to reward ratio which markets you know has the most trading opportunities yadda yadda and it’s only true reviewing your trades right you can actually improve on things maybe you find out that this pattern maybe does even make money at all and you can move on to something else or maybe if I don’t hate this pattern actually makes a profit in the long run and however right near certain times when this pattern does better than other times maybe it works best on let’s say on a Wednesday and Thursday it doesn’t work as well on a Monday or maybe you find out that this pattern works best in the gold market oil market and doesn’t work well in let’s say the stock market so you can see that through your trick generally and review right this is how you can actually improve yourself as a trader and find your edge in the markets right so the first thing right as a discretionary trader is to remember this this concept I just share with you I call it the Durham method right develop your trading plan around the pattern that you’re identifying number two right execute your trades consistently a minimum of hundred traits number three record your trades and before review them to find your each so now what about the other type of trainer systematic traders right who trade with fixed rigid rules how do you find in each of the markets so this is actually a an approach right that I also adopt myself both both technique one and two may take me to is I would say in my later part of my trading career where I started to move more into a systematic trading so technique to what I did is that I studied right traders who have found success before me systematic traders who are willing to share their rules and systems so the best way to go about it is to read books to study academic research papers so just to give you a few books that I’ve read that have really helped me number one following the trend by Andrea’s clean oh he also wrote a book on trading involved you can check out our unholy grills by Nick ranch you can read a short-term trading strategies that work by Larry and Caesar Alvarez those are some of the books right that I’ve read that actually shed the systems and the results with it but doesn’t mean that you know those systems are guaranteed to work and you just train them life no of course not right you should take those systems alright and then ask yourself right why do these systems work right you need to ask yourself what is the why behind the systems for example trend-following why does it work what’s the logic behind it if I can’t come up with a logic or there’s no reason that I think that issue work right I will not even touch the system at all so for trend-following it’s because right the market trends right because of fear and greed in the markets humans are primarily the ones right getting involved in the markets and we all have fear in greed when there is greed and markets it’s gonna be an uptrend and trend followers they can capture you know a certain part of the uptrend and when there’s fear in the markets trend for lows we can go short and capture the meat right of a downtrend and that’s why trend following work because there’s fear and greed in the markets when once you identify identify right why a trading strategy or system should work the next thing you want to do is to validate it I never trust stuff that I come across right even though there’s Beck test results right I never trust those results I always want to do my own back test and validate whether the trading system works or not so this is where you know you do your back testing right if you have programming knowledge I think I test the system right if you don’t have programming knowledge right find someone who can do it right give them the rules or maybe the rules that you get from the book right give it to them and ask them right for the results of the systems right it may not be hundred percent correct but if anywhere between 80 90 percent similarity right I would say that it’s pretty much ok right things are pretty much aligned my expectations and finally the last thing that I do right is I want to tweak the system right to my own preference I don’t just want to train the system blindly right I have certain needs and of preference for example trend-following right again and really no I believe he talks about the media the trend following in his book following the trip break out of our 50 days 58 the highest close over the last 50 days and a380 our trailing stop loss for me I don’t want to trade such medium-term trend-following I went in for longer term trend following so I traded the breakout of the 200-day right highest close over the last 200 days and I adopted a longer term trailing stop loss to write a longer term trick and you can see that this is how I make tweaks right to my own systemic trading systems and the way and it is my first right learning right from other traders who have come before me finding a logic to the system validating it tweaking it and then finally right trading it with my own life money and this is how I find my own edge in the markets both as a discretionary trainer and systemic trader you may not want to go with both approaches like me maybe just discretionary trading or systemic Trading whatever suits you but I hope fully right this gives you a good idea right to how you can go and find your own edge in the markets all right so with that said I have come towards the end of today’s episode if you’ve enjoyed it right smash the like button hit the thumbs up button right here subscribe to my youtube channel I will talk to you soon you

LEAVE A REPLY

Please enter your comment!
Please enter your name here