“To get what you want, you have to deserve what you want. The world is not yet a crazy enough place to reward a whole bunch of undeserving people.” ― Charles T. Munger
I wanted to honor Charles Munger, who celebrated his 99th birthday last Sunday, by sharing this quote from him that I love.
Dear Traders, Friends, and Colleagues: Happy New Year!
I wish you, your family, and your loved ones Happiness, Health, and Wealth going into 2023.
2022 was an immense year of growth for me, personally and professionally. Trading full-time makes me a better man, and sharing the ups and downs with you helped me tremendously. I want to write more long-form/out-of-the-box content that provides value. I wrote 75 articles in 2022; my goal for 2023 is 52 (one article per week).
Each article will be sent every Sunday at 6 am ET, just like today.
Edge
(noun)
The outside limit of an object, area, or surface; a place or part farthest away from the center of something.
The farthest you are from the crowd (center), the closer you are to finding success (edge) in the market. This is, of course, my personal opinion. I don’t want to be sitting in a crowded trade. I don’t want to trade the same way everyone does. Said differently: “my entry is your stop loss”.
But how do you find your Edge?
How to Find your Edge?
There are a million ways to discover Edge. I’m part of the group that thinks Edge should be easy and boring. It took me a lot of time to accept it. Coming from a scientific background, I have always admired complex models. “If it’s complex, it means I’m smart.” Even though I didn’t want to admit it to myself, I guess I had some ego problem. It’s now gone. I look for simplicity.
When I was a senior in college, I skipped the whole year to work on an algorithm. I spent hundreds of hours trying to find a strategy with a win rate above 90%. It was pure mental illness. I almost failed my degree after 5 years of study to chase a chimer. I still kept going at it for a few more years without success. I lost a lot of valuable time, but I learned a lesson: look for simplicity. Thrive in simplicity. I don’t give a f*** about what people think of me anymore. At the end of the day, I’m paying my bills; if I’m in trouble, I’m the one to blame; if I find success, I’m the one to congratulate.
As you may know, I’m a BIG fan of podcasts. I listen to trading podcasts almost every day. There are so many great traders out there, and there’s a massive asymmetrical opportunity listening to them. You can hear for hours professional traders sharing their stories, beginnings, and what worked and what didn’t. I often get asked on Twitter, “how do you come up with new trading ideas?”.
There are no magical recipes. But if I had to answer, that’s what I’d say (in no particular order):
Screen time
Podcasts
Messing around with data and Python
Screen time
Screen time
and… Screen time
Screen time
On the screen time part, no one will ever be able to help you. I have no idea how many hours I invested watching charts, but it’s in thousands of hours. All of this while losing money. For years. You have to truly love the game.
I fell asleep watching the 1-min chart so many times that I’m not even ashamed of it anymore. I dreamed of the markets too many times. I made these idiotic spreadsheets where I projected making 1% a day for a year to realize I’d (not) be rich in a few months. I watched gurus’ videos thinking there was some kind of loophole.
BREAKING NEWS
There are no shortcuts.
Pay your tuition to the Markets: your VALUABLE time.
Podcasts
There are many great podcasts. My favorite podcast is CWT (Chat With Traders). I’m so grateful for Aaron, the original host of the show. I probably listened to at least 200 of the 250 podcasts, many of which I listened to multiple times.
Here’s their website: Chat With Traders website.
I added below a selection of some of my favorite episodes that gave me many ideas for some of my trading systems. If you want to get more creative, I encourage you to actively listen to these podcasts, there is so much wisdom to be gained from them. I’ve listened to the ones I listed at least 3-4 times.
There are many more, and I invite you to try some of them if you’re looking for ideas. I highly recommend listening to the first one - it completely blew my mind.
Messing around with data and Python
I lost count of the evenings after work when I would try some strategies I thought while at my previous job. 99% of the time, there are worthless ideas, but 1% of the time, it’s a good lead. And you keep building on it. Just like with the rest, it takes time. My backtesting framework is already in place, I have the data (tick data), so it’s really easy now to try stuff. Plus, I mostly trade $NQ, so it makes things easier.
I won’t show you any Python code because that’s not the purpose of this article, but I’ll show some graphs that, hopefully, will give you some ideas. As usual, there is no investment advice; I’m writing because I love sharing my journey.
Momentum trading
What happens when the RSI on higher time frames becomes “overbought”? Our contrarian minds would probably look for shorts. Let’s look at the weekly $NQ chart. I added a yellow dashed vertical line when the RSI crossed 70. What happened after? A short pull-back followed by a 55% bull run. Is this happening frequently? Does it happen on lower timeframes? Can I add a regime filter to filter through the noise? That’s the type of stuff I LOVE looking at.
Volume Climax
As you may know, I opened a $10,000 SOL position after Christmas to swing it to $0 or $100, whatever comes first. What’s my thesis?
A massive volume spike on higher timeframes, followed by some sideways action. Asymmetrical opportunities.
VIX / $NQ “correlation”
Dragvs7 on Twitter recently talked about the relationship between the VIX and indexes. I spent some time last week going through my charts to see if I could get anything out of it. It was a fun exercise; if someone used it in 2022, it probably gave them an Edge.
The question is, how can you find stuff like this ahead of the crowd? And hopefully, now that we’re at the end of this article, you realize that it will come through an open mind, research, and hard work.
It would really mean a lot if you could share this article. One of my goals for 2023 is to have 5,000 subscribers on this Substack, and I would be grateful if you could help me grow it.
I hope you enjoyed this article because I loved writing it. I’ll see you next Sunday.
Until then, stay safe.
- Retail
PS: I had a few people reaching out to me on Twitter asking why they were not receiving my emails anymore.
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Twitter: @itsonlymoney12
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Great article. Finding an edge is a quite complex task and spectacular job on telling how much time is required for thriving in the field.
I believe that, as in life, your area of genius is a place where you are naturally good at and a place where you can handle more pain than the average person. I'm not a trader, but it seems natural people's edge should derive from that.
💯 % relate.. Totally 💯 % !!!!!
Screen time.. paying dues.. losing money.. making money.. giving it back.. frustration, frustration, frustration!!! Build confidence with your specialty and of yourself... I been at this 10 yrs plus!!
My EDGE is 2-3 fold-
I do some simple hand charting, (go out & find a lot of traders doing that and I’ll kiss your ass) along with the candles.. i have some simple S&D setups a 4 yr old with a crayon can do.. I visualize both losses and profits like a madman.. I rehearse constantly.. at the moment I stick with just NQ, so 1 market.. I get bigger picture context.. very very few indicators.. I look for 1:.5, 1:1, 1:2, 1:3 RR (not Rockstar shit).. I trade small ass size I can manage.. I run (literally) away from my screens when I’m up at my session goal.. I won’t go back into my office ALL week in the event I’m up Monday or Tuesday (not once, try it, easier said than done).. I count down until 3:15 (again literally watching my watch) before I “officially” record my P&L (daily) and 3:15 on Friday (weekly) cuz I’ve given back every cent in last 30 minutes of the day and week too many times to count.. I stay in constant contact with an accountability coach (who is a more advanced trader than me) daily (I pay him real money monthly for this pleasure).. I wait 45 minutes past the open to get into most my trades.. I live a “higher performance” lifestyle (workout, diet, journal, mental game etc..) twenty four seven, which is demanding (fuck no I don’t FEEL like it everyday) to compliment the high performance aspect of trading..
*I am a recovering alcoholic and addict (15 yrs sober) so I learned a long time ago to admit short comings, and bury some of my pride, act and do different from the crowd and friends! Could give less than ten cents what people think, everyone’s full of shit anyway !!!!
That’s most of it! That’s most my EDGE!! Grow the fuck up and man up!! (or woman up, women often times are great traders IMO).. Stop blaming everything and being a pussy (aka a victim).. save that for group or therapy!
Be great and go hard everyday bell to bell 👊🏻 😎