What’s your edge?

  • Posted by
  • on December 22nd, 2012

We received an email this morning from a subscriber:

“This is just a general question now that I have followed you for a number of months.  What is your ‘edge’?  Better said, how would you characterize “your edge”?  I believe that I could answer that but not succinctly like you might be able to”

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It’s funny, but in 15 years of trading no one really has asked us that — here’s our answer:

That’s a great question — ok here goes:

1) we’re very good at reading daily charts, knowing when to get in and push hard and initiate multiple swings, and when to back off and go to cash.  When to stick to daytrading (choppy, treacherous tape) and when to take it overnight (benign, friendly, forgiving tape). But lots of people know how to read daily charts.

2) we’re good at reading intraday charts and strategies we have come up with — Indy, base and break, are now part of many traders’ arsenals. But lots of daytraders are good at reading intraday charts.

3) our edge then for us is to combine these two very well. We have spots (alerts) we know have a good chance of getting a reaction on daily, and then we have the tools on intraday to enter with good risk/reward precision. We are good at waiting for balls to line up before pulling trigger, and this increases our win rate, which in turn increases our conviction, which in turn increases our PnL. It’s a good positive cycle.

4) discipline — we’re less active than most daytraders (we’re somewhere between day and swing) and we really, really wait for the trade to come to us. Of course we weren’t like this in our 20s but we have been trading professionally for around 15 years so that’s come with screen time.  We know now not to treat every trading day the same.

5) conviction — when we have a spot on our newsletter for days and days, when it finally goes, we have the conviction not to falter, and to trade it. We don’t hesitate — and it’s the only time we don’t wait for perfect intraday set-up– especially since the good ones often go near the open.   You need that faith/conviction for those type of trades– and for that, you need confidence.  And in order to get confidence you need a solid track record.  And for us to get a solid track record … we had to develop points 1-4.

Hope that answers it a bit — HCPG

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It’s a good idea to ask yourself that and write it down — as we wrote in our newsletter back in 2006 :

The act of writing lends clarity and coherence to one’s thoughts as it forces you to think over what you are doing. This is something we have come to realize even more strongly since we started this service. We are always aiming to trade in an orderly, clear and disciplined manner. Articulating and putting down our rules, printing out charts, and commenting on patterns for the next day has made us more focused traders.

Ask yourself that and write down the answer– what’s your edge?

 

 

The information in this blog post represents my own opinions and does not contain a recommendation for any particular security or investment. I or my affiliates may hold positions or other interests in securities mentioned in the Blog, please see my Disclaimer page for my full disclaimer.

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