Thanks to our friends at Indicator Warehouse for today's guest post!
What’s YOUR Day Trading Edge?
We talk about having an edge in day trading all the time, but what is it really? So many day traders I speak with think a “trading edge” is as simple as just having a strategy that works more often than not. Is this really the case, is it really that easy to blindly take day trading signals from a strategy you purchased or created?
I am going to have to say no to that one. For me (and many others I think) a traders edge has several components. The biggest component to a day trader’s edge is psychology in my opinion. So what is trading psychology anyway? We hear about it all the time, but all too often it is just “buzz-words” when you ask the person saying it to explain. For me, trading psychology is my ability to realize that my day trading set ups are good, but they are not perfect, hence, I will have some losing trades. Day trading psychology will “kick in” when I have to take the next signal/opportunity after a losing trade. This is where it can get tricky; in my opinion it’s always easier to take another trade after a winner rather than a loser. Let’s face it. Not matter how good your system is, sometimes there are losers. Ever had a loser first thing out of the gate in the morning? That one can be a killer. Getting over “My first trade of the day bomb” can be worse than getting over a nasty hang-over. At least with a hang-over, there’s Aspirin to the rescue. But with practice and the help of a properly maintained trade journal it can be done. A trade journal is critical. It is the best medicine for day trading aches and pains and is critical regarding learning to day trade.
What other components lead to a trading edge? I consider the office I rent a critical part of my day trading edge. Every day I walk into a comfortable, clean, professional environment that offers me a place where I will not be distracted or disturbed. I feel more comfortable and confident because of this and I definitely consider how I “feel” as part of my edge.
Another edge (which I love) is technology. I don’t have a PC that I trade with that was purchased at a “box-store”, I have a day trading PC that was made specifically for day trading and I feel it was worth every penny I paid for it. Also, I have commercial grade internet that tops the home version in all aspects. Don’t get me wrong, cable internet even at home is good, but I need all the speed I can get so I have opted to pay a little more to have the best internet connection possible as I consider this added speed another advantage.
Finally, the last piece to my day trading edge may is the one ignored by so many people… risk management, also known as position sizing. I have absolute peace of mind before every trade because I already KNOW how much capital I have at risk and I KNOW that it will never be so much that is unnecessarily puts my trading account in jeopardy. I also KNOW that when I catch a “runner” move I will be properly capitalized to take full advantage of the move, thereby countering any prior loses… and then some!
Take some time and write down all aspects of your trading edge and you will be surprised what you come up with.
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Risk Disclaimer: Past performance is not indicative of future results. Futures trading involves substantial financial risk. Views of guest commentators do not represent those of TradingPub.com. Article intended for educational purposes only and not meant in anyway as a solicitation to buy or sell certain securities. Please consult your personal financial adviser before using this information for your own trading purposes.