Mark Douglas on Trading Edge: How to Profit Without an 80% Win Rate

So, what what is an edge? So, we we’ll draw some inspiration from Mark Douglas he’s written two books, uh three, maybe that if you haven’t read them, I think I think reading books is a is a great thing. You get to look at different systems. How different people think right, even if it’s a book on day trading or a book on completely you know untoward investing building your just you know. Your knowledge keeps your brain, you know pretty sharp. What you don’t want to do is hey. I just Wani wants one setup, and I’ll wake up and look at Uh charts all day and just go back to sleep. I think you know we need to keep our brains sharp and always be a little bit curious about you know. What other people are doing what they, how you know? How did they figure it out, and this quote from uh, Mark Douglas Richard is going to read it out and then we can discuss it.

Yes sure, an edge, nothing more than an indication of a higher probability of one thing happening over another so at the basics or you know at the root of it and edges. What Mark’s trying to say is it’s not a guarantee right? It’s not a guarantee of it will always work as we execute upon it. There are no guarantees. If it works four out of 10times, it’s still an edge. If it works three out of 10 times, it’s still an edge. The best Traders the win rate doesn’t have to be eight out. Of10, nine out of 10 for you to be successful right and. Our mindset has to be of that nature, as well what we tend to do is if we describe a setup, anda particular Edge that we have in the markets. That edge Works in certain markets and it doesn’t work another market and that’s perfectly fine righto. But if we box ourselves in and say Hey how Doi increase my probability for from three out of10 to four out of 10, I see that when the markets doing this, if I just avoid this type of Market my output increases from three, you know my win rate Increases from three out of 10 trades to, four out of 10, that’s a huge difference. That you can make to your Equity curve.

That’s a huge difference over a long span of time. If you do 50trades, that’s that that makes a big difference at the end of the day. So, what Mark’s trying to say here is it’s nothing more than an indication that you’re just a little bit more successful, then you’re not, and that’s what an edge at the endif the day are again. People tend to think that anted is hey. It has to work n out of 10 times and ifrit. Doesn’t it’s not n? Let me go to uh you know some cloud formations on technical charts or, some new system that I can get closer to eight or nine out of 10 times that seldom exists those signals uh. You know, I’m telling you three out of 10 is really good. Four out of 10is amazing five out of 10 is out of this world six out of 10.

You should go and – and you know, unmake it proprietary and make sure you don’t you know share it with anybody else. So um, let’s go onto the next one uh this one talks about Richard go, ahead and yeah sure and yeah. I was going to reemphasize the fact that an edge doesn’t mean has to work 8 % of the time uh the majority of Traders there, looking for positive expectancy when which incorporates, if they’re right, how much do they make when they’re right if they’re wrong? How do they lose when they’re wrong?

That’s a key factor that bu that that’s Incorporated in Edge as well? So here we go. Whyde casinos make consistent money on an event that has a random outcome because they know that over a series of events. That’s really Keya series of events. The odds are in their favorite also know that to realize the benefits of the favorable odds, they have to participate in every event yeah. This is great quote so this quote it, like you, said, a series of events where the know that they have a positive expectancy and the know that they will eventually be on top of that you know at the end of the day. So that’s they’ve built a business and a model. That’s just based on that, and people go there, for you know it’s more about having fun with you know family friends Tebbutt. That model is just we, as you know, when we place a trade, we don’t know what the outcome is going to be. We place.

We know we place a series of Trades, and we know that as long as we know that the odds are, are in our favor. We’re going to have a favorable outcome at the end of the day’s casinos and Traders. How they operate are verisimilar. That’s why people draw analogies, Blackjack analogies and all of that stuff, because our framework, if it’s strong – and we know over a series trades, we’ll come out on top one loss – is not going to put us down. Five losses in a row are not going to put us down, because we have some level of confidence that we’ve built that when we seethe through, we will eventually come out onto, even though in some cases it might be just a dollar right.

So uh, let’s keep going with what, is an edge right. So now we will try to specialize our discussion enough of the big talk and, like the you know how what different peopled this is more about how we can kind of apply some of these Concepts and really specialize and become. Subject, met expert so what is an edge it’s from, a technical perspective it or a fundamental perspective? It’s a winning characteristic, what is, a winning characteristic.

It’s something that stocks in the past, over the last 50 years, when they’ve moved double triple and then some or stocks that have gone down 100. You know 50 6070 % off of their highs, they’ve exhibited these characteristics. What you want to do, if you want to build an edge in the markets, is you want to find that winning characteristic? That could be bowling your bands that could be Fibonacci that could beads that could be RSI on monthly, going above70 uh. That could be anything there’s hundreds of different ways but define that winning characteristic that you see that you know if you’re a bullish Trader. You know the this is what stocks. Are doing when they double and triple thesis what stocks are doing when they break down 5060 % off of their highs?

You define that and you just have a list of those right and that applies to any system any Trader any successful, mina vcp2T 3T and all that stuff right. What is it? It’s just, tightness in price formation, he’s seen this, winning characteristic where contraction and volatility read leads to expansion in price? Be it North or South right up or down of that from that contraction and that’s a Ving characteristic he’s design designed for himself and he’s continuously exploiting the market to see the same thing again and again and again, but he understands why he understands every stock in the past that Ieither I’ve been Success he’s been successful, on or uh as a technical Trader.

I see that a winning characteristic he’s exploiting at the end of the day.

That’s what an edge is.

It’s a winning characteristic. We need to continuously exploit this again and again to increase the chances of a positive outcome right, there’s repetitioning. What these successful Traders are doing, again and again and that increases their chances apositive outcome prior leadership stocks have exhibited these characteristics, so we learn – from what’s happened in the past in the markets. Right we learned that uh, you know uh when, when Square in2017 had a h when Facebook in 2013 had a HV when Google broke out from its IPO base, whatever itis all of them exhibited this one characteristic which we’ll discuss, which is the highest volume characteristic right highest volume ever highest volume, Say IPO, Etc so PRI leadership, stocks that seem to double and triple have some sort of you know. This characteristic, if I’m a day trader, blander B seem to narrow down right and the standard deviation of how the stock moves basically it’s tightness.

It’s a measure of tightness, see seem seems to squish together and we see volatility and the bends. You know come apart, saying: that from tightness, you know from contraction comes expansion, it’s a very simple concept: bandit’s being given us a hundred different names at the end of the day, but it’s a characteristic of how stocks move in the markets, hunt for these characteristics in the current market, so If you have, for example, let’s say just build a OneNote right, Microsoft.

One Note hopefully we’ll have it in deep view one day where you could just build mod book super quickly, but Microsoft one for example open a tab, name a characteristic and say all of these stocks are keep you know Uh there, exhibiting these characteristics I’m just going to keep track of them. You keep track of that stuff you’ll see how they play out and your subconscious you’re. Building that analogy, in your, subconscious right and Traders that are successful they execute that edge. Repeatedly they’re repeatedly doing the same thing again: and again, manini built a whole system on BCPS right and. He sees accelerating growth and sales which is drawn from William O’Neal system. Then he combines Duh Stan Weinstein stages and described stocks and.

He combined three successful systems into to his own system, right and – and it was drawn from bam, O’Neal’s St analysis and a little bit of himself. At the same time, so he built some repeatable patterns and characteristics, that he has to watch for, and he studied them by him himself. He didn’t say: hey villa, I trust villa O’Neal. He says Roe is greater than 17. I must use this or else I’ll, never be successful. None of them think that way they think the opposite. They say he. You know this is what worked for Vill O’Neal when. I try this.

It’s not working for me. Butthis aspect of his system seems to work, let me, steal that aspect and make my system even stronger right. So, Traders and investors must do deep Ties on these characteristics to buildself-confidence self-confidence, self-studying is key, because you have to go out there and execute those things for yourself and that all comes down to spotting, some sort of winning characteristic Brian Chanon says the 5 EMA is declining. I don’t buy stocks below it because that’s what works for me when the stock goes above, the 5 EMA orthel SMA it works. You know I have a positive expectancy in the market, he’s identified, a winning characteristic on the shorter time. Frames that work, those work for him and he’s repeatedly executing.

Those to profit from the markets nonmatter, what system you pick fundamental technical this is what they’re doing again and again and again and again so define those characteristics for yourself, maybe list them in the chat what do.

You look for again and again in the markets try to you know specialize to that as much as possible Traders tend to have three to four that, they look for and they repeat those things and. Then you know they try to. You could say: heugh stocks are accelerating sales and big estimates seem to move that could be a Ving characteristic and. You only trade, those type of stocks rights.

They try to specialize as much as possible.

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