Shorting stocks and generally trading it is all about finding your edge. And only trade that edge day in and day out. The goal is to erase everything else and just focus on that edge. You can edge more edges into your trading. However, you should have one main one. Like I had.
First of all what is an “edge”?
A edge is one thing happening over another. So what is the odds that this chart pattern will go down? If you have back tested it and know it is 80% winning. Trade it without hesitations. So your goal is to find a chart pattern that gives the odds in your favor. That’s with other words, how you reach consistency. And consistency is the ultimate goal of a trader.
Finding your edge
Too find your edge, you need first of all to find what type of trader you wanna be. Do you want to trade gold, oil, penny stocks, momo stocks, large cap, mid cap or small caps? Find where you want to find your edge. Then go and study one of the type of traders you want to be. Then look into the past and find the odds on that type of chart pattern that have happens in the past. We say at least 20 patterns needs to be back-tested before you can find the odds behind it.
“Trading should be natural and easy. Don’t force anything, and don’t fight the market or yourself. Perfect trading is like breathing. You inhale and exhale, enter and exit. Be calm and relaxed. Look for recognizable opportunities. Be focused and alert. Detach yourself from the heat of action. Be an observer and wait for opportunities to find you. Don’t trade what you can’t read. Don’t think you have to trade everything. There are just so many opportunities that fit your personality, your ability to read. Take those, and ignore the others. Don’t try to be a universal trader who can trade any type of market on any given day.
Don’t guess. Don’t personalize the market. Don’t expect the market to care. It doesn’t care. It’s not hostile. It’s not friendly. It exists. That’s it.
Smart money action can be seen as slow, gradual price movement with steady or slowly increasing volume. The public’s action is characterized by hysterical and parabolic price spikes, almost vertical movement with a sharp volume increase.” From techniques of tape trading.
This is so important to think about!
Read and believe this every single day if you want success
BE PATIENT AND WAIT FOR YOUR TRADING SIGNAL!
Remember: Trading is not about being wrong or right. Its simply a probabilities game. You know your edge. You must think in probabilities, you aren’t going to win everytime. The way to be a consistent winner is to understand that your edge is there to give you higher probabilities of something happening over a series of trades. Therefore, you need to take every pattern that presents itself, accept that each outcome is random but over a series of trades you will be pulling consistent profits! It takes other trades to make you winner so when other trades don’t come into the market with the same idea/edge as you, then you must cut it and move on.
All you can do is to take every trade signal which you see and determine your risk level and your profit taking points. You can’t control anything else so there is no reason to get upset or have any sort of emotions.
The goal is to trade reactive when the market gives you a signal without even thinking because there is nothing to think about. CAREFREE STATE OF MIND! You know the outcome is going to be random so since it’s random, there is nothing to be upset or happy about. It’s just a probabilities game and when the market shows you a signal you enter and have a risk and profit taking areas. THAT’S IT! CAREFREE STATE OF MIND! THERE IS NOTHING TO HAVE EMOTIONS ABOUT!
5 Fundamental Truths of Trading (Probability Mindset)
- Anything can happen.
- You don’t need to know what’s going to happen next to make money.
- There is a random distribution between wins and losses for any given set of variables
- 4. And edge is nothing more than an indication of a higher probability o one thing happening over another
- Every moment in the market is unique.
I am Consistent Winner Because ( Belief Mindset)
- I objectively identify my edges.
- I pre defined the risk on every trade.
- I completely accept risk or I am willing to let go of the trade.
- I act on my edges without reservation or hesitation.
- I pay myself as the market money available too me.
- I Continually monitor my susceptibility for making errors.
- I understand the absolute necessity f these principles of a consistent success and, therefor, I never violate them.