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Not to be trite, but I think it could be reasonably claimed that the source of any trader's edge would be other traders - or more specifically, their failures, shortcomings, and mistakes.
My best performing strategy over the years has been to fade major positioning imbalances. In other words, identifying other speculators' greatest vulnerabiities and exploiting the risk asymmetries created by their collective actions.
The most successful trader I ever knew used to often say: "I don't trade prices; I trade traders." I think most of us, to one degree or another, do the same.
My very simplified source of Edge:
Technical Patterns @ KeyLvLs in particular technical Contexts resulting in favorable price movement of N before -N more often than not.
KeyLvLs:
Trendline/Channel Line Overnight H/L HOD/LOD
EMA
Previous Support Becomes Resistance
Previous Resistance Becomes Support
Inside of Price Swings
Contexts:
Narrow Range like Flags, triangles where lots of overlapping bars and FLAT EMA
Wide Range where price trades back and forth around an EMA
Trend where Price makes clearly identifiable HH/HL or LL/LH and also pay attention to steepness of TLs and/or EMA Slope
Use different targets in different contexts
In my experience, the marriage of these 3 aspects (Pattern, Key Levels and Context) gives the strongest edge. I could, however, just trade 2 of these, but I found the edge to be thinner. Ex. Trading patterns @ Keylvl disregarding context or trading patterns in context without KeyLvLs. The only aspect I can trade on it's own and get away with it is Context like buy and hold for example.
I have been in this journey for about 6 years now and I recently went full-time abandoning my 9-5. As I think about the source of my edge during my constant evolution, I find it hard to pinpoint anything technical. I agree with most replies in the thread, particularly the importance of context and adjusting to current market behavior.
If I have to mention the true source of my trade edge as I think of it, I would have to say it is my ability to keep losses small and care very little for it. I know cutting losses short and letting winners run is a cliche', but I feel is the single most thing that has kept me in the game and keeps me going. I still work on it every day. Every time I cut a trade, I tell myself something good is going to happen very soon and I need that big win to be meaningful. It has kept me away from having big losing days. That to me is my edge.
I just started day trading futures. And lost $500 a half month into it :0
I now really question my desire to daytrade futures. I have been swingtrading stock and my account averages around $1000 gain each month over past year (about 3% to 5% ROI monthly)
I bought into the technical beauty of volumes study, order flow. I love how people have Jigsaw DOM lined up in thier monitors, knowing what drives prices up and down. Looks cool AF.
Whereas when I swingtrade stock, I focus on indicators and, at most, some volumes profile.
They say TA is not as reliavle, I agree, but why it is making me profits while reading price action is so tricky.
I put 3 hours into future trading each day, but only 1 hour for swing trading stocks (excepted for research)
Man, swing trading stock is just 9-5 to me, kind of boring now.
But the result really have me question my motive to daytrade futures :0
I think my recent obsession with futures stems from discovering the fact CME offers more transparency in regards to their order flow, with Rithmic you can see Market by Order and full depth.
I thought it was the end-game. I thought I could see everything that moves and just follow the big money. I thought it would make my trades easier and more accurate.
How wrong I was. It is the same with trading with indicators. You still need to make your own judgement. You still don’t really know what is happening. You still require good risk management. And on top of that, everything just moves faster intraday.
On emotional side, you also feel the pressure “winning” every trade because you will have to close it to avoid overnight risks. Size wise, even with Micros, you are risking about $15000 per position for MES. I can easily adjust between $30000 position size and $300 position size for stocks trading.
Commissions are also higher for futures. So if I am swing trading indices, I might as well just buy index ETF? Man, they even pay you dividends. Lol.
Ah, the mythical quest for 'certainty', for 'knowing', for the Holy Grail. But all the market offers is probabilities. But that's ENOUGH. And that's the good news.
You are never in the wrong place... but sometimes you are in the right place looking at things in the wrong way.
This is going to sound weird but my observation is stocks are usually way more problematic to trade compared to index futures, especially if they have low volume.