I wrote this y/day for someone else, so thought I'd post it here;
If you ever go into a trade and any of the following precedes that action, then you are probably doing nothing but guessing, and you do almost certainly do not have a trading edge in your chosen market (s) / t/f (s.)
1. It looks as though it might....
2. I think it will.....
3. I expect it to.....
4. I predict that......
Now, it might even be an 'educated guess,' For eg; You may have observed/learnt/read that for example a bullish pinbar candle seems to experience an upside follow-thru, - but unless on that specific t/f, on that specific trading instrument, you have a large representative sample of times from the past (in those market conditions that exist at the current one,) that suggests that this is the greater probability -and/or- that more gain is available when it does than loss when it doesn't, sufficient to realise a net gain over the sample, - then it is still a guess based on observational/anecdotal evidence only. You do not have an edge that is known to you.
I see the phrases listed as 1 to 4 above in posts here and other places all the time, and other variations of these that mean basically the same thing, and I know why traders lose and continue to lose overall. Some never learn/ignore this lesson thinking it's not important, and that their experience/intelligence will get them through, - but it very likely, to an almost certainty won't.
You need to have a proven trading edge over a large representative trade sample(s) size, that your risk and trade management is optimised to, and then you need to learn to actually trade it profitably. Ie you need to develop the necessary personal psychology to do so, devoid of emotion and mistakes centring around the negative emotions of greed, fear, hope, frustration/boredom, and revenge, countered in most part by the almost always learned, or at least enhanced, skills of patience and discipline.
You also need to know the important stats about your edge so that you know that it is performing within it's known and tolerated boundaries, (assuming your own trading of it re own psychology is,!) They are listed below;
a. Win rate (%) over last sample, and to date.
b. Largest win in current sample, and to date.
c. largest loser in current sample, and to date (should always be your max stop.)
d. Average win and typical win over last sample, and to date.
e. Average loser and typical loser over last sample and to date.
f. % Chances of a consecutive loss of howsoever many trades at last sample win rate.
g. Longest losing run (LLR) in current sample, and to date.
h. Longest winning run (LWR) in current sample, and to date.
And so, at the end of each sample, you/the spreadsheet do/does the stats. (My sample sizes are 20 trades for eg.) Agree/disagree, but I won't be getting into any discussion/arguments about it. It works for me, - that's all I need to know, I don't need anyone else's opinion about it, I have first-hand evidence.
-----------------------------------------------------------------
...meantime
1hr below
If you ever go into a trade and any of the following precedes that action, then you are probably doing nothing but guessing, and you do almost certainly do not have a trading edge in your chosen market (s) / t/f (s.)
1. It looks as though it might....
2. I think it will.....
3. I expect it to.....
4. I predict that......
Now, it might even be an 'educated guess,' For eg; You may have observed/learnt/read that for example a bullish pinbar candle seems to experience an upside follow-thru, - but unless on that specific t/f, on that specific trading instrument, you have a large representative sample of times from the past (in those market conditions that exist at the current one,) that suggests that this is the greater probability -and/or- that more gain is available when it does than loss when it doesn't, sufficient to realise a net gain over the sample, - then it is still a guess based on observational/anecdotal evidence only. You do not have an edge that is known to you.
I see the phrases listed as 1 to 4 above in posts here and other places all the time, and other variations of these that mean basically the same thing, and I know why traders lose and continue to lose overall. Some never learn/ignore this lesson thinking it's not important, and that their experience/intelligence will get them through, - but it very likely, to an almost certainty won't.
You need to have a proven trading edge over a large representative trade sample(s) size, that your risk and trade management is optimised to, and then you need to learn to actually trade it profitably. Ie you need to develop the necessary personal psychology to do so, devoid of emotion and mistakes centring around the negative emotions of greed, fear, hope, frustration/boredom, and revenge, countered in most part by the almost always learned, or at least enhanced, skills of patience and discipline.
You also need to know the important stats about your edge so that you know that it is performing within it's known and tolerated boundaries, (assuming your own trading of it re own psychology is,!) They are listed below;
a. Win rate (%) over last sample, and to date.
b. Largest win in current sample, and to date.
c. largest loser in current sample, and to date (should always be your max stop.)
d. Average win and typical win over last sample, and to date.
e. Average loser and typical loser over last sample and to date.
f. % Chances of a consecutive loss of howsoever many trades at last sample win rate.
g. Longest losing run (LLR) in current sample, and to date.
h. Longest winning run (LWR) in current sample, and to date.
And so, at the end of each sample, you/the spreadsheet do/does the stats. (My sample sizes are 20 trades for eg.) Agree/disagree, but I won't be getting into any discussion/arguments about it. It works for me, - that's all I need to know, I don't need anyone else's opinion about it, I have first-hand evidence.
-----------------------------------------------------------------
...meantime
1hr below
Attached Image (click to enlarge)
Trader with an Edge.
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5
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