Edge
Psychology
What it means
A repeatable reason your trades should make money over a large sample, paired with risk management. A few lucky wins are not an edge.
Example
If your backtest shows that buying a specific pullback setup on EUR/USD yields +0.3R per trade over 500 trades, that statistical advantage -- plus your risk rules -- is your edge.
Mistake beginners make
Beginners claim an "edge" after winning 4 trades in a row. Four trades is noise; an edge shows up over hundreds of trades and survives out-of-sample testing and live trading.
Related terms
- Trading Plan — A written set of rules covering what you trade, when you enter, when you exit, how much yo…
- Expectancy — The average amount you expect to make per trade, accounting for both wins and losses. A po…
- Backtesting — Running a strategy over historical data to see how it would have performed, before risking…