My Only Edge In Markets

Here's a screenshot from Friday's trade in SPY (bottom panel), with the NYSE TICK (ratio of stocks upticking to downticking) in the top panel. Overlaid on the TICK is a 10-period moving average, and the blue line represents the zero level, where upticks and downticks are equal.

I've studied in depth my winning and losing trades and the bottom line is that I only have one edge in trading. When I identify spots where sellers are dominant, but can't push the market significantly lower, that works out as an area to buy. The sellers are trapped and have to cover. When I identify spots where buyers are dominant, but can't push prices to new relative highs, that is often worth fading. The buyers are trapped and have to bail.

Everyone is overleveraged. No one can take meaningful heat. That is the source of my short-term trading edge.

I make money when I trade that edge. I lose money when I try to be someone other than who I am in markets.

Which makes self-understanding and especially 

 the only true source of trading edge.

Further Reading: Trading the Market's Psychology

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