The Prop Trader's Chronicles: Short-Term Proprietary Trading Strategies for Both Bull and Bear Markets

CHAPTER 9

Trading with a Real Edge

The concept of an edge in the financial markets is as widespread among struggling traders as it is among full-time prop traders. The difference I have learned over the years is the interpretation of what makes a real edge.

A segment of struggling traders are holy grail chasers. If you've come across any trading book in the past 10 years, you've probably heard the old statement “there is no holy grail” a few million times. And whether it's openly admitted or not, most struggling traders continue to search for that one, single, elusive holy grail strategy.

Here's the real secret: There's no single strategy, no single edge that can be exploited forever. There are, however, many types of edges that come and go, and that's more than enough for a full-time trader to make a living.

Turn a different perspective onto this. If General Electric taught you “the secret strategy to becoming a global conglomerate,” do you really believe every entrepreneur should spend his whole life trying to replicate the exact process that GE used to become what it is today? No. New companies like Google have had no trouble becoming massive global enterprises by exploiting their own edge in the market.

The point isn't to stop looking for a real edge in the markets. The point is that your job as a trader should be to find and develop an edge that works today, in the market that you will be trading for the coming month or year. And when that begins to weaken, you adapt and ...