Want to find a winning edge in trading? What is your edge, and how to create one?
Winning Edge In Trading
Firstly we have to find a method that can generate positive results. A system that is developed as per you and your style of trading is more important rater than the winning percentage.
Example
If you have an 80% win rate that looks like this:
- 1st Win $200
- 2ndWin $200
- 3rd $200
- 4th Win $200
- 5th Lose $1000
Even with 80% win rate this system is in loosing one.
Following System is a like winning system:
- 1st Lose $200
- 2nd Lose $200
- 3rd Lose $200
- 4thLose $200
- 5th Win $2000
The system above is very strong even if it only wins 20% of the time. You need at least 25-30 trades with rules for when to enter and exit and how big your positions should be to make a record and check your system with your wins and losses to see if your system has a good chance of making money or not.
A winning edge in trading
You should always follow the rules and strategies of system you made for your system with a lot of discipline. You will have an advantage over other traders in the market.
If you don’t care about your ego, emotions, or plan, you can still win if you follow through. In order to save money, you need to be able to understand and ignore your ego about being wrong on a trade and cut your losses early on.
Risk Management
Most of the new traders handle their accounts without managing the risk. Random trades with lots of risk will keep working against them even though the trader has a winning setup. He will bet too big on losing plays (by averaging down) to make up for the money he has already made. A lot of new traders think of this as averaging down on the trades and not having a plan for the trade.
Prolific Trader’s thoughts
They don’t even know that they could lose money. It’s important to know how much you risk per trade and how many trades you can be wrong on before you lose your whole account.
“Rule of Thumb.”
Is it possible to lose five straight times and still make money? If you risk 10% of your total account capital on each trade and lose 5 times in a row, how much money would you lose? let that sink in for a moment. You are down 50% of your account and will need a 100% return to get even. Whether you make money or lose money in trading is a lot about how you size your positions and how you figure out your SL (Stop Loss) and PT ( Profit-taking).
Rule of thumb: As long as you keep your risk level low, you should be able to win a lot of trades with a good strategy. You will be able to find your advantage in the markets and win in the long run, too. Everyone who trades or invests isn’t 100% right. Traders who are good at making money in the long run try to be 60% to 70% right with a good winning system.
