A common theme in earning money online is looking for quick and easy procedures. Most people enter with excitement, and then jump from one method to another when they feel things are getting difficult or results aren’t materialising.
This type of behaviour happens in the trading realm too.
Traders are jumping from strategy to strategy, hoping that one of them will make them profitable.
It’s like going on a random ship expecting it to take you to your destination. You don’t know if it’s going to your finish line. You also don’t know the ship’s route to your destination.
It would be better to own a ship and control where it’s going. With that being said:
Don’t look for what works in trading — work on finding an edge instead.
Athletes spend months perfecting their craft before they head into a competition.
Film productions spend at least a year doing takes to make a 2-hour movie.
Drivers spend weeks learning how to drive before doing a test.
In most things, more work goes into perfecting how to win than actually practising winning. Trading is no different. However, many traders find themselves looking for someone else’s strategy that works instead of building their own.
Traders should be focused on finding their own edge.
An edge is a market exploit that allows you to be profitable long-term. It’s an identifiable pattern or sequence that appears often enough for you to take advantage of.
The act of finding an edge is about going into the market and observing it long enough until you find something noteworthy.
Here’s a simplified way of doing this:
The 4-Step Process To Finding A Trading Edge
1. Accept that there’s no holy grail
The perfect trade doesn’t exist. You’re unlikely to find an edge that makes you win 100% of trades with a 1:4 risk-reward ratio or an advantage where you make 10,000 pips with one lot in one move.
There are many ways to skin the markets, but none will be perfect. You have to accept the imperfections a profitable edge might come with — that’s a skill within itself.
But remember, it’s not always about being right. Two successful traders can have adversarial trading strategies. Both are still profitable because they enter and exit at different times or have different risk-reward ratios.
Trading is about finding what works for you.
2. Learn about the market you’re in
Now that you’ve acknowledged the non-existence of a holy grail strategy, you then need to understand the market you’re in because all markets are different. Here are some things to look out for when studying your market:
- The market’s volatility, average pips it moves daily, highs and lows, etc.
- The way news affects how people trade in your market.
- When anomalies appear in your market, such as the times and days significant volume enters.
- Patterns you discover when you apply indicators to your market.
3. Start experimenting
Find trading opportunities from the insights you’ve gathered about your market. You can do this by going on a trading chart and seeing where the insights affect the market. After you’ve noticed something, you’d want to backtest your findings by:
- Applying a take profit and stop loss amount to all the trading opportunities you’ve discovered in past data.
- Record the results from each trade into a spreadsheet.
- Sum the profits of the trade to see if you’re profitable.
- If you’re not profitable, start again.
4. Trade your strategy on a demo account (or you can risk very low capital on a live account)
If your strategy is working over a series of trades, congrats! You’ve got an edge in the market.
I’ll be honest. It’s not a walk in the park finding a trading edge.
Getting insights and finding market opportunities can be difficult for a new trader. It’s time-consuming and requires you to go through trial and error.
On top of that, you may have a bias in your backtesting which gives you different results to live trading.
This is why we created TradrLab.
It’s software that can generate insights and statistics about markets you’re interested in. With that information, you can easily use our drag-and-drop editor to construct a trading strategy and then backtest it in seconds against past market data.
TradrLab shortcuts the speed and difficulty it takes to find an edge in the market.
Avoid instantly trusting trading strategies you find on YouTube. Either verify them or build your own for an edge in the markets.
TradrLab is designed to assist you in your journey to profitable trading.
We’re releasing our beta soon — sign up below for early access!