Crafting Your Trading Advantage

What’s your edge? Everyone always talks about it but what the heck does edge even mean anyway?

The definition may vary (and I don’t think there’s a textbook version), but edge to me is some ability, skill, or market observation that gives you an advantage over other market participants.

• Hedge funds might have an information edge
• HFT firms used to have a technology edge
• Prop traders used to have a speed and commission structure edge

Finding your edge as a retail trader is tougher, you need to look in different places…

Example skills:

1 – Reading order flow and taking advantage of large orders moving the market
2 – Spotting short-term turning points in the market
3 – Identifying fresh momentum

Example price observations:

1 – Price revisiting extremes after a trend day
2 – US index movement after EU close
3 – Power hour after a breakout

You get the idea… Edge can be simple or complex. It can be small or large.

I also think your work ethic, pre-market prep and homework can be an edge. (It might not make you money, but it definitely adds to the likelihood of your success.)

More importantly, I think you can stack layers of edge together.

Good prep + open specialism + order flow skill = edge.

Today, think about your edge. Can you define it?

Even if you are not 100% sure what that is yet, think of something you believe you are good at (or could be good at) and work to build it. Because a lot of this game is confidence, and if you believe you have an edge that’s more likely to play out…