Saturday, September 2, 2017

Exploiting Your Edge In The Market

As a purely technical trader, I have to constantly ask my self "Do I have honestly have an edge"? Assuming the answer is yes, the next step I take is to breakdown my edge in as much detail as possible, and trade strictly based on it. This requires the utmost in discipline and constant back checking of my edge. Requiring I review my trades making sure I am continually profitable.

I do not like to disclose the edge I have, and rather keep it proprietary (for fear it will no longer be profitable if public). I do, however, like to give out some hints on how to create a profitable edge. The key that many miss when it comes to their edge is it must be greater than the fees you pay to trade. One interesting consideration many don't take into account is , if your edge is break even, you will end up losing, as the fees it cost to trade will make you negative (possibly by a large margin). However if you are breakeven including those fees, there is another way to make money.

That way is through bonuses of opening an account in the form of a stock trading bonus, or a forex trading bonus. This is much like the way online poker players make money. They are often are charged a rake (i.e. stock trading fees), were they are break-even poker players (including house/rake fees). Where they make their money is made through the bonuses of paying so much rake.

This would apply to traders of the markets, through trading bonuses as I mentioned earlier. An example would be getting a forex trading bonus. The idea here is to use up your forex/stock trading bonus, and then sign up for another account with a new broker. Theoretically, in this example, your edge is breakeven (it can even be slightly negative), you would be making money based on the bonuses you have signed up for. Having a breakeven edge is not as difficult as having a truly profitable one (so its more realistic). Thus, you would move broker to broker, using a stock or forex trading bonus, ideally profiting on the bonus. Anything above the bonus would be icing on the cake!

Keep in mind such a strategy is not trivial, and would require careful thought, and lots of research and backtesting. However, I believe if one is to be profitable in any market, the strategy laid out in this article is the easiest and most realistic ways to achieve such a goal.