Many traders who do happen to have an edge with their methodology are still not performing well. If that was not the case, many more traders would be profitable. As a trading psychologist and an active trader myself I have a different view of “edge”.

You are your own edge. It’s in the gray matter between your ears. More specifically, your edge is your ability to adapt. Call it cognitive flexibility, or whatever you want, but this is the reality of trading.

As traders we use logic and data to justify our decisions, and we spend lots of time looking at charts….but at the crucial moment, where the rubber meets the road, it’s our emotions/feelings that actually provide the fuel to pull the trigger or not, whether it’s an entry or an exit, a winner or a loser. See my recent webinar http://bit.ly/f2ebRl where I show why your emotions are impossible to ignore and how they play an important role in your trading decisions.

For example, when it comes to entries, one’s ability to adapt is critical, especially for the discretionary trader, because set-ups often don’t look neat and clean. Mixed signals and some degree of ambiguity are common.  Ability to tolerate ambiguity is a psychological skill. And when it comes to exits, it’s even more critical. In fact, while entries and good trade location are very important, its’ ultimately your exits that will determine how much success you experience as a trader.

Trading involves a lot of disappointment (set-ups are not always perfect, target not always reached, we exit and then see it go on to work, etc), and that disappointment often puts traders on tilt causing emotions to trump will power, paving the way for traders to veer from their plan and break their rules.

Focus on understanding yourself and understanding why you do what you do as a way to build your personal edge. The more you do this, the more your trading will improve.