Edge Building: Turn the Way You Trade Into a Plan You Can Test

What are the parts of an edge?

An edge is a way of trading that comes out ahead over many trades. Building one starts with splitting your trading into six parts, each one resting on the one before:

1. The confluences you look at. The pieces of your setup, like a level, a candle or the direction of the bigger chart.
2. Combinations. Which of those show up together, and how they do together.
3. The market. Was it trending or sideways, quiet or fast, and which session was it?
4. How you got in. Where your stop went, how early you entered, and whether you followed your rules.
5. What you did after. Moving your stop, taking profit early, or holding to your target.
6. Your average result. What a trade was worth on average, counted over enough trades.

Skip a part and you can only report your results, not explain them.

The confluences you look at

Start by breaking your setup into pieces. Take a “break and retest”, where price breaks through a level and then comes back to test it. That is not one thing. It is a level, a break, a return to the level, a candle that confirms it, the direction of the bigger chart and the time of day. Each piece is one confluence: one thing you check before you enter.

In EdgeFlow each piece becomes a box you tick on every trade, in your own words. If naming them is the hard part, you can describe your last trade to Flow, a short interview built into EdgeFlow, and it suggests boxes from your own words. You confirm each one before it is used. What confluence means in trading has examples from different styles.

Combinations

A single box rarely explains your results on its own. Price at your level might do well when the bigger chart is moving your way and badly when it is not. So EdgeFlow looks at which combinations of your boxes came up together in your trades, and how each combination did.

It also shows which boxes went with a losing average, so you can leave them out of your plan. If two boxes really ask the same question, like “trend up” and “bullish”, you can tell EdgeFlow to count them as one, and undo it later.

The market

The same setup can be strong when the market is trending and weak when it goes sideways. Note what the bigger chart was doing on every trade, in a word. The session, the day of the week and the time of day are read from the time of the trade. Then each kind of market can be looked at on its own, so a setup that works in a trend is not judged on sideways days.

How you got in

Your entry, stop (the price where you get out at a loss) and target (the price where you planned to take profit) are required on every trade. They give your result in R. R is your result in units of risk: +2R means you made twice what you risked. Keeping how you got in apart from the setup shows how much of a result came from the strategy and how much from the way you traded it.

What you did after

This is where setups that make money quietly turn into setups that break even. Moving your stop to your entry price too soon, or closing at the first wobble, cuts off the big winners that pay for the losers. If you also note how far each trade went for you and against you, EdgeFlow can show what a stop at your entry price or a fixed target would have done on your own trades.

Your average result

All of the above leads to one question: for each group of trades, what was a trade worth on average? Traders call that expectancy. EdgeFlow shows it in R for every group, always with the number of trades behind it. When a group holds too few trades, it says it is too early to tell, so a lucky run is not read as an edge.

From findings to a plan

What you find becomes one checklist: the setup you always need, the market it works in, how you get in and what you do after, each line with the number of trades behind it. You can tick that checklist before you take a trade.

Then you freeze the plan, so its numbers stop moving. Every trade after that is a test, compared with your other trades from the same weeks: the plan is ahead, it is too early to say, or it stopped working. How to turn your journal into a trading plan walks through the same steps by hand.

Common questions

Related reading

• What a trading edge is
• Finding what works in your trades
• Which trading journal helps you build an edge?
• Expectancy, explained in plain words