Friday 17 September 2010

If the Earth is Flat, Where's the Edge?

Since starting this blog, almost a year now, I decided to trawl the web to see what other people are writing about and doing.

People are still trying to become CP (consistently profitable) by jumping from one "system" to another in search of that perfect edge where all trades are winners and where you don't need to spend any effort in learning. 

It's like when I was single and met a new girl - that first few months of romance was intoxicating and unreal, everything worked. A few months would go by the relationship "wasn't working"out and I was off again.  It wasn't until I found someone that I wanted to keep forever, that I saw the value (edge) in it.  That I needed to work hard to keep the relationship at it's best.

Trading is an endeavour when the real possibility of what you are doing  may be a loss yet you still go ahead. Why? Well, after you have completed your SIM trading and have reached CP, you have gathered statistics to show that, say, out of every 40 trades, 28 are winning trades and 12 are losing trades. The only problem is that you never know in which order the winners and losers will appear. In theory, you could have 12 losers followed by 28 winners or visa versa or any mixture in between. The entry for a winning trade looks just like the entry for a loser. What makes the difference? A big trader or group of traders may take the opposite side of your trade and the order flow reverses and you have a losing trade. Unpredictable.

But if you are trading your plan with it's built in edge, then you are successful no matter the outcome because over time, you know you will make money.

The second thing I noticed was that the things people are trying to teach, in many cases is something that they can not articulate clearly and while they may or may not be making money doing it, they certainly don't seem to be successful at knowledge transfer. A critical part of teaching is to be able to transfer your knowledge to a student so he can replicate your success. Your success not necessarily your style. The methodology you learn needs to be market agnostic and time frame agnostic to have longevity. It must keep on working forever. Markets change in volatility and rhythm but all liquid markets have an order flow that you can trade successfully if you know how to read it.

That is what trading is.

Great opportunity today in the ES. i was exchanging emails with one of the guys I mentor and we were talking about the gap trade. The market was way above yesterday's close and there was my favorite: a zipper.

You can see the result in the video. BTW, fyi, Youtube massages the video for what looks like the first 15 minutes after it's posted to improve HD.

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