If you are still struggling with your trading, leave everything you are doing for just a few minutes and focus on this one question: what is your edge in this business? do you have one? what is your advantage? how is your trading strategy giving you favorable odds to make profits in the long run?
You are most probable flooded with all the info on the social media platforms: astronomic returns in a short time (which may happen occasionally), good-looking promo videos, influencers promoting trading strategies, courses, robots etc… and the truth is that is very hard for you (if you are not a professional in this field) to focus on high-quality information, so you end up spending your energy and money on products (strategies, courses, robots) that will never give you an edge and will not be able to help you make profits constantly.
What to do
So here are a few things you can do so you don’t end up losing money and time:
- ask questions – if someone is trying to sell you a product, ask them questions until you get a sense of that product and you can understand (at least to some degree) how can that product/service will help you
- look for the edge – what is the advantage that product/service is offering to you? You may not find this until you are consuming that product and this is understandable in some cases ( ex: courses that are teaching you an edge cannot provide this before you enroll)
- search for proof – if you are offered a trading robot/strategy you should ask for historic results of that robot. There are 3rd party websites that can pull data out of trading accounts that are using that robot and you can see how it did in the past
- adjust your expectations – try to get rid of the hype created around that product and rationally calculate your risk/reward expectations, based on facts, not hunches, not promises, not fake reviews ( which most of them are, by the way).
Let’s talk a bit more about the second item from the list above: look for the edge
Every successful person is gaining based on an edge, regardless of the field they are in (some of them are doing it consciously, some have the edge but do not even realize it). One example is this: a good salesperson can sell a lot of merchandise because he/she is a very sociable, communicative, empathic person – this is his/her edge. Not anyone can do that!
The edge in trading
Now, back to trading: you also need an edge here if you want to be successful. Maybe you will need some energy and time to understand (or look for) strategies/robots/trading tools/mentors etc and if they have/or don’t have an edge but this is the most profitable thing you can do in the long run. In a trading system/robot you first have to look for the basic concept of that robot and how can that offer an edge… an advantage. Usually, this edge is quantifiable (through market data analysis), and/or it can be proven.
A couple of examples:
- arbitrage trading – the edge here is that it is a very low-risk strategy, it is what is called a zero-risk strategy (it really is NOT 0 but RR is very good). These systems are highly-dependable on the market conditions you are offered by your broker (execution speed, commissions, spreads, etc), on your trading infrastructure (you need good hardware and proximity to your broker/trading venue), and on your software solution (you need a very robust, fast software and intelligent algorithms). If you comply with these 3 aspects, you can have a winning system here.
- mean reversion algorithms – the edge here is that the prices in a market are always moving in zig-zags, so you can develop/use a trading system that is taking advantage of this natural market behavior. In this case, you will need a deep price analysis so you can correctly define your trading parameters (how long can a zig-zag be, which are the best-fitted markets for this strategy, etc).
Winning systems are boring
Yes, you read it right: winning systems are boring, they are nothing you have seen in movies, promo videos, influencer stories etc.
Winning systems are boring because:
- good trades need patience… a lot of patience
- winning in the long term is doable by small trading: no huge gains from one trade, but lots of small trades over and over again – how boring is that!?
- a very important part of a profitable trading system is the risk/trade management and respecting that management (some decent math is involved here) – so who likes math and where the adrenaline is respecting a trading plan over and over again – boring again!
I hope you did not lose your trading appetite after this story 🙂