If you want consistent success as a trader, it is crucial to develop a trading strategy that has an Edge in the Indian market.

No matter your trading goals, you won’t be able to make money in the markets without an edge.

Despite this, most traders have no idea what a trading edge is, let alone how to develop one. So let’s fix that in this article.

What is a Trading Edge?

An applied technique or approach that gives an advantage over the rest of the market is a trading edge. It doesn’t have to be complicated, sometimes simple rules are enough to gain an edge. Your edge could even be your consistency. 

What is a Zero Sum Game?

Most games are zero sum, including chess, tennis, and poker. This essentially means that  the amount gained by one player is equal to the amount lost by another play. Points can only be exchanged, not destroyed or created.

How to Develop an Edge: A Solid Trading Plan

You can’t have an edge unless you have an approach to the market. To develop an edge, you must first start with the lens through which you view the market. You should take some time to think about your beliefs about the market, and then detail your goals as well as your capabilities. If you are working full-time in an office job, it might be silly to try and trade a scalping strategy. But if you have limited capital, swing trading also might not be ideal. 

Once you have figured out the best approach for you, then you can start to test, observe and study the market, paper trading, and eventually work yourself into small positions. 

Watch the video below with Urvashi Ghosh, Lead of Bookmap India, to learn how to utilize Bookmap’s powerful visualization tool with a heatmap view and make smarter trading decisions for better results.

It is worth keeping in mind that even the most profitable trading strategies will have losing periods, and that brings us to our next point.

Consistency

Making steady gains in the markets requires not only a trading edge but also the discipline to apply it on a consistent basis. If you are unable to follow your trading strategy, then you will be trading blindly and leaving your trading results down to chance alone.

But trading isn’t about your last trade in Nifty or BankNifty, it’s about the series of trades over time. Following your trading plan and having the discipline to apply your edge consistently can be an edge in itself. 

Risk Management

It’s not enough to have a great strategy if you overtrade or trade too large for your account balance. Trading is very much about surviving to trade another day, so having risk management rules that keep you out of trades during suboptimal trading sessions when your edge may not be valid, or simply walking away from the screens after too many losses in a row. 

Sticking to the general rule of only risking 2% per trade is also a good principle to live by. 

Backtesting and Forward Testing

Many trading platforms offer some sort of backtesting feature. Data can (and should) be divided into various sets to facilitate in-sample and out-of-sample testing, giving traders a realistic and efficient means of evaluating a trading strategy. 

To determine the feasibility of a trading system, it is essential to analyze it based on clean data and avoid over-optimization of the trading rules. 

Adding forward testing to the out-of-sample testing adds another level of insight into the robustness of your strategy before releasing it into the market and risking real money.

Use Order Flow Logic

Using a top-down approach based on order flow trading principles, means you can base your strategy on the logic of market microstructure, and combine that with your market experience over time.

Bookmap offers valuable insights into the significance of order flow in trading. To delve deeper, explore our Bookmap India playlist, where you can find an educational course on order flow available in both Hindi and English languages.

Learn From The Best

To learn to paint, it is often said you should first study how the greats painted. Only then can you start to improvise and develop your own style. Trading is very similar. Markets have been around for a long time, and there are many time-tested rules for approaching the market.

It can also help to join a trading community such as ours (free on Discord). Indian traders love sharing their knowledge, and you can learn a lot from more experienced traders.

 The below image showcases a screenshot shared by one of our members from the Indian traders’ community wherein the trader has used the Footprint chart, VWAP, and POC indicator to find entry and exit strategies using Bookmap’s order flow tools. 

How to Keep Your Trading Edge

Keep a Trading Journal

You should always keep a trading journal to know if you are managing to follow your trading rules. It can be also useful for spotting patterns in your results. Perhaps every time you trade during a news release you lose money, so then you can just add a rule to avoid trading around news releases, and suddenly your results have improved.

Tracking things such as assets namely stocks/futures/options/currency derivatives, time and date, direction, setup, as well as general comments or emotional status during the trade is common.

Monitor the Market

Simply monitoring the market on a daily basis will get you in the groove and give you a feel for the ebb and flow of capital markets. 

Even if you are not taking trades, your subconscious mind will be taking in the information and you will become a better trader with time.

Test your Trading Edge

Good traders are very scientific. You can test your trading edge with backtesting as mentioned, but you are also essentially testing your edge every time you make a trade: first when you put it on and hold it until it hits your stop loss or target, and then over time as you collect a series of trades in your journal. 

Combined, this acts as a test of your edge in market environments and at different fractal levels of time and price, giving you insights into what your edge really is—and more importantly—if it still exists.

Conclusion

What a trading edge actually is will be perceived slightly differently for each person, but one thing is for sure: you can’t do it without the right tools.

Bookmap was built to help traders win. The platform comes with an array of tools for uncovering the Indian market.  Jump in today.

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