{"id":39760,"date":"2015-01-21T12:35:17","date_gmt":"2015-01-21T17:35:17","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=39760"},"modified":"2023-04-25T17:23:19","modified_gmt":"2023-04-25T21:23:19","slug":"7-steps-to-building-trading-edge","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/7-steps-to-building-trading-edge","title":{"rendered":"7 Steps to Building Trading Edge"},"content":{"rendered":"

Hey Mike Bellafiore,<\/p>\n

I’ve been following you for over a year now and have both your books. You post great threads too.<\/p>\n

I believe the greatest challenge is creating that edge. Its rare to come across a mentor in this industry, especially if you don’t have your foot in a prop firm.<\/p>\n

Do you have any recommendations about the best way to tackle the challenge of developing an edge? Does it have to be perfect? Can you settle for mediocre at the early stages of development and implementation?<\/p>\n

There are several software that help optimize edges but for a guy who has no experience in it it’s a challenge.<\/p>\n

I feel as though I have discipline, and patience but no concrete trading edge to implement……<\/p>\n

Best wishes,<\/p>\n

Patrick<\/p><\/blockquote>\n

@MikeBellafiore<\/strong><\/p>\n

1. First learn how to trade.\u00a0 Learning a trade with edge without trading skills will lead to trading losses.\u00a0\u00a0 Learn how to pick the best stocks to trade, read the tape, technical analysis, news catalysts that move stocks, manage risk, size your trades, think through a solid trade, etc.<\/p>\n

Trading skill + trading edge = profits.<\/p>\n

Trading edge – a lack of trading skills = losses<\/p>\n

2. Learn different trading strategies and setups.\u00a0 For short term traders effective strategies include: scalping, momentum trading, news edge, high beta technical analysis trading, low float stocks, Stocks In Play, unusual options activity, technical swing trading, breaking news headline plays, etc.<\/p>\n

Then determine: What setups make the most sense to you?<\/p>\n

3. Now practice those strategies that make sense to you on a demo\/simulator.\u00a0 See if you can build edge with these patterns in simulation.\u00a0 There is no point to bet money in the marketplace before you have proved edge first on a demo.<\/p>\n

4. Find trading tools to signal your favorite setups.\u00a0 We say to be bionic!\u00a0 It’s 2015.\u00a0 Join the technology age.\u00a0 One trader on our desk who has made the most progress has done so by building custom filters.\u00a0 He was not very good.\u00a0 Let me be clear- he sucked.\u00a0 And now he is consistently profitably.<\/p>\n

5. Record and tweak you favorite trades.\u00a0 On our desk we use SMBU Performance Center powered by Tradervue to record our trade results and journal.\u00a0 From these notes and stats we tweak our trading to build from our strengths.<\/p>\n

Do you trade best on the open?\u00a0 Do you trade best holding technical swing trades?\u00a0 Do you trade beaten down reversal trades best?\u00a0 This information is in your trading stats.\u00a0 Find it.<\/p>\n

6. Add new strategies where you can find edge.\u00a0 Assume the trades that work now will not going forward.\u00a0 Why?\u00a0 Because they probably won’t based on market history.<\/p>\n

Be prepared for some or much of your trading edge to one day be eliminated by the market.\u00a0 That is why slowly adding plays to your trading is essential to sustain as a trader.\u00a0 What works one day may not another.<\/p>\n

This is the world we have chosen as traders.<\/p>\n

7. Be patient.\u00a0 There is a fine line between a trade with which you can develop edge and a trade with which you do not have edge.\u00a0 It may take you some time to internalize a trade so you can effectively trade it in real-time.<\/p>\n

Pro traders do not make real money for a good 2-3 years.\u00a0 Relax, learn, and focus on your trading improvement.<\/p>\n

\"tradingworkshop\"<\/a><\/p>\n

Mike Bellafiore is the Co-Founder of SMB Capital and SMBU, which provides trading education in stocks, and options. Bella is the author of One Good Trade<\/em> and The PlayBook<\/em>. He welcomes your trading questions at mbellafiore@smbcap.com.<\/p>\n

*No relevant positions<\/p>\n

 <\/p>\n","protected":false},"excerpt":{"rendered":"

Hey Mike Bellafiore, I’ve been following you for over a year now and have both your books. You post great threads too. I believe the greatest challenge is creating that edge. Its rare to come across a mentor in this industry, especially if you don’t have your foot in a prop firm. Do you have any recommendations about the best … Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1],"tags":[859,879,788,795,38],"class_list":["post-39760","post","type-post","status-publish","format-standard","hentry","category-general-comments-2","tag-859","tag-building","tag-edge","tag-steps","tag-trading","no-post-thumbnail"],"yoast_head":"\n7 Steps to Building Trading Edge | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/7-steps-to-building-trading-edge\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"7 Steps to Building Trading Edge | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Hey Mike Bellafiore, I’ve been following you for over a year now and have both your books. 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