Edge - what is it?

[Jaydee]

(1) Competitive advantage: an advantage that a person has over its competitors. In terms of trading this will give a trader the change to identify market direction
(2) Absolute advantage: The ability of individual to produce more winning trades than any other in the financial sector
(3) Comparative advantage: a situation in which a trader can produce a trade with a low cost (but high margin) than a competitor

Good post Magos, but are the advantages you mention not just a type of edge rather than a definition of it? I.e. whichever one of these you have, surely it gives a mathmatical, postitive expectation in the long run?

 

[Magos]

Good post Magos, but are the advantages you mention not just a type of edge? I.e. whichever one of these you have, surely it gives a mathmatical, postitive expectation in the long run?

Yes you are right I believe in maths, but then again you cannot model the market can you?

 

[Jaydee]

Yes you are right I believe in maths, but then again you cannot model the market can you?

I agree, the market can't be modelled entirely by maths (LTCM anyone?); unlike casino games where, over a long enough sample period, uncertain singular outcomes trend towards a certain average outcome. This is the 'je ne sais quoi' of the market and what makes it so interesting (for me at least).

However, regarding trading, you can look at your past trades and, assuming your setups and execution were consistent, plug them into the basic formula I put up earlier. This would allow you to deduce how much of an 'edge' you had, if at all. It's better than nothing but, I completely agree, it is far from perfect.

 

[porph]

What about if your trades are purely discretionary, perhaps based on some fundamental research? If that person is consistently profitable from these trades is that considered an edge albiet one that is not quantifiable?

 

[Jaydee]

What about if your trades are purely discretionary, perhaps based on some fundamental research? If that person is consistently profitable from these trades is that considered an edge albiet one that is not quantifiable?

Good question Porph. I'm not sure about this. I am a descretionary trader and believe that all such traders are loosely systematic in their entries, exits, etc. All my entries and exits conform to some parameters which, while not being written down rules, do come together to form my trading methodolgy.

A person who uses the approach you suggested could still go over their past trades to quantify their historical edge. However, I think this raises the question about any so called trading 'edge' - it can only be defined from past data and cannot be projected with absolute certainty into the future due to the dynamics of the market changing. Essentially, every participant affects the market, just through the simple actions of buying and selling. This is the opposite to casino games where an 'edge' will always be the same over time because the games dynamics never change - they are orderly and unaffected by the participants playing.

I guess in trading, any 'edge' a participant has is more of a flimsy 'psuedo edge' than a real (casino-esque) one.

 

[temptrader]

they don't want to hear this

An edge is applicable to any competitive activity, not only trading. To me, having an edge means possessing a quality and/or factor which gives you superiority over rivals, which is pretty much a dictionary definition.

Firewalker99 and PKFFW don't want to hear this.

Most posters on this thread don't want to hear this. They all want to kid themselves that they can make it, simply because they're on a BB board where people "help" one another.

You and I know brutally that it has to be like this, as Socrates keeps on saying about Gladiatorial combat, and non transference of "edges", and yet posters on this site keep on prodding away for "answers".

It's utterly moronic and retarded to even think that anyone can be as brilliant as a top scientist or sportsman given enough "training" (Firewalker99's idiotic line of thought). Evolution was always about comparative advantage between species and within species, why should intelligence and talent be any different?

I don't think anyone deserves anything in life. I don't think there is a thing called "worthiness" or "earned the right to". My view is that people do the things they do because they can get away with it.

 

[porph]

Firewalker99 and PKFFW don't want to hear this.

Most posters on this thread don't want to hear this. They all want to kid themselves that they can make it, simply because they're on a BB board where people "help" one another.

You and I know brutally that it has to be like this, as Socrates keeps on saying about Gladiatorial combat, and non transference of "edges", and yet posters on this site keep on prodding away for "answers".

It's utterly moronic and retarded to even think that anyone can be as brilliant as a top scientist or sportsman given enough "training" (Firewalker99's idiotic line of thought). Evolution was always about comparative advantage between species and within species, why should intelligence and talent be any different?

I don't think anyone deserves anything in life. I don't think there is a thing called "worthiness" or "earned the right to". My view is that people do the things they do because they can get away with it.

I believe that a certain level of intelligence is a requirement for this game but beyond that it makes sweet fa difference. I do agree that whilst you can be taught the tools, you really need to figure out how to use them by yourself.

 

[new_trader]

Good question Porph. I'm not sure about this. I am a descretionary trader and believe that all such traders are loosely systematic in their entries, exits, etc. All my entries and exits conform to some parameters which, while not being written down rules, do come together to form my trading methodolgy.

A person who uses the approach you suggested could still go over their past trades to quantify their historical edge. However, I think this raises the question about any so called trading 'edge' - it can only be defined from past data and cannot be projected with absolute certainty into the future due to the dynamics of the market changing. Essentially, every participant affects the market, just through the simple actions of buying and selling. This is the opposite to casino games where an 'edge' will always be the same over time because the games dynamics never change - they are orderly and unaffected by the participants playing.

I guess in trading, any 'edge' a participant has is more of a flimsy 'psuedo edge' than a real (casino-esque) one.

The ability to adapt quickly to changing or sudden unexpected circumstances is part of the overall qualities that form an edge. This is NOT a system or a probability or historical data/performance or win/loss ratio or a rule...etc...etc...etc... ad nauseam, it is part of the edge, pure and simple. Having the right mental qualifications (however you want to define right) form part of the edge but people who think in terms of 'system' always overlook this whenever they harp on about alleged "changing markets". Conditions change but markets don't.

System people only know win/loss ratio, drawdown, risk/reward ratio and all the other banal textbook expressions associated with system trading. They confidently assert that these nebulous systems contain the edge but don’t explain what skills or understanding a person needs to have in order to create, design, invent, construct, develop or program a profitable one.

 

[Jaydee]

The ability to adapt quickly to changing or sudden unexpected circumstances is part of the overall qualities that form an edge. This is NOT a system or a probability or historical data/performance or win/loss ratio or a rule...etc...etc...etc... ad nauseam, it is part of the edge, pure and simple. Having the right mental qualifications (however you want to define right) form part of the edge but people who think in terms of 'system' always overlook this whenever they harp on about alleged "changing markets". Conditions change but markets don't.

I'd agree with this. Perhaps it is more important to be systematic in post trade analysis than anything else. Questioning every trade you make by evaluation of the entry and exit is a way to improve trading aptitude. This in turn allows a trader to make optimal decisions at the time of the trade which, at the end of the day, is all trading really is.

System people only know win/loss ratio, drawdown, risk/reward ratio and all the other banal textbook expressions associated with system trading. They confidently assert that these nebulous systems contain the edge but don’t explain what skills or understanding a person needs to have in order to create, design, invent, construct, develop or program a profitable one.

While I agree that textbooks can't teach trading, the better ones do lay the foundations by speaking of the terms you mention. I think people are better off with this knowledge than without it, but it is nothing more than rudimentary.

As for what traits are necessary, I think tenacity is the single most important one. Trading is making the right decision based on patterns within numbers, charts, economic data, whatever - it comes with time. Spend enough time in front of Egyptian hieroglyphs without any previous understanding of them and, after a while, you'll start to figure out what they mean. I'm convinced that the reason so many fail at this is because they give up trying to figure out the hieroglyphs or don't have the confidence to trade their understanding of them.

Unlike sports such as football, I don't believe trading aptitude is a gift which some have naturally and some don't. Cristiano Ronaldo was able to kick a ball as soon as he could walk, but there's not a trader (past or present) who could just make money the day he/she stepped onto the floor.

An 'Edge', whatever that means to you, comes with time. If you are making money consistently, you have one whether you have analysed it or not; if you are losing money, you don't have one but that doesn't mean you won't ever have one.

 

[temptrader]

I believe that a certain level of intelligence is a requirement for this game but beyond that it makes sweet fa difference. I do agree that whilst you can be taught the tools, you really need to figure out how to use them by yourself.

What a lot of people don't seem to understand is that trading is just like any other profession: some people are just better at it THAN others. Do you see or not see?

Like other professions, there are certain qualities required from the individual for success to be possible. Some of these qualities can be gained over time, some are innate, and to confuse the picture, some only come into being after a lot of effort. So we actually have other "issues" involved before we could even start an intelligible discussion about the requirements.

But unlike other professions, where there is formal openness as regards what it requires to be successful, it is not really in the interests of those who are successful to "help", and it does not work that way.

I know most of you don't want to hear his name, but the only real person who can tell us properly what is required is Socrates - but he tells you things that you don't want to hear. I've been called monkey by him often and realized that I deserved it. Most of the posters here are actually engaged in nothing but monkey talk but can't see it. (Firewalker99 and PKFFW amongst them).

 

[the blades]

Most of the posters here are actually engaged in nothing but monkey talk but can't see it. (Firewalker99 and PKFFW amongst them).

what a wonderfiul human being you are temptrader.

I see your name on the list of new posts, and just know there'll be a "car crash" developing.

UTB

 

[temptrader]

forgot to add . . .

Don't know who said this, but its generally true:

You can't take advice from people! they are not reliable!

[Open your eyes and forget everything you know... start new, search the truth, and do whats right... Courage!]

the blades,

I'm not here to be a wonderful human being. Nor traders who are consistently profitable. When you join their ranks - IF you join their ranks - you'll understand. That is all.

 

[the blades]

I'm not here to be a wonderful human being. Nor traders who are consistently profitable. When you join their ranks - IF you join their ranks - you'll understand. That is all.

very recently you were talking about packing up because you couldn't cut it. You are NOT in a position to lecture anyone. THAT, is all.

UTB

 

[temptrader]

very recently you were talking about packing up because you couldn't cut it. You are NOT in a position to lecture anyone. THAT, is all.

UTB

And I might have to pack it in. At least I have the brutal honesty to say so, unlike some fools/deluded idiots here who constantly post and know total f*ck all about trading, not realising who the ones who do are, nor giving them the chance, or getting angry at them, like I did.

Socrates knows, new_trader knows. You'll do well to follow them, but you won't have that. You'll all poison the threads and then the arguments, aggressive behaviour and abuse starts (just like I was).

failing at something is nothing to be ashamed of. you just find out that you're not suited to it, and move on. it's not the end of the world.

 

[nine]

... Socrates knows, new_trader knows... failing at something is nothing to be ashamed of. you just find out that you're not suited to it, and move on. it's not the end of the world.

No problem with your failing at something. The interesting question, given the strength of your assertions about Soco's trading methods, and trading in general: do you know why you are failing?

dB always argued that most traders fail because they don't have a plan. Is that the reason in this case?

 

[the blades]

Socrates knows, new_trader knows. You'll do well to follow them, but you won't have that. You'll all poison the threads and then the arguments, aggressive behaviour and abuse starts (just like I was).

ok, I'm all ears. Direct me to the threads by new_trader where he is showing the way. Forget Socrates' threads as I don't speak the language.


UTB

 

[the blades]

No problem with your failing at something. The interesting question, given the strength of your assertions about Soco's trading methods, and trading in general: do you know why you are failing?

Agreed. Admittng your failures is to be applauded. It's shouting the odds from a position of rank ametuer that's a bit rich.

UTB

 

[porph]

temptrader, I dont really see your point, you seem to have waffled on without divulging anything of importance.

You seem to say it is innate, you have to learn and also some comes from experience. Well duh.. is that not applicable to everything and anything?

You seem like a lot of people on here, obsessed about doing it the 'right' way. Trading is not that complicated.

 

[temptrader]

temptrader, I dont really see your point, you seem to have waffled on without divulging anything of importance.

You seem to say it is innate, you have to learn and also some comes from experience. Well duh.. is that not applicable to everything and anything?

You seem like a lot of people on here, obsessed about doing it the 'right' way. Trading is not that complicated.

And here is a classic example.

Everyone thinks they can do it, but most will never admit that they NEVER can.

They keep on waffling, talk amongst themselves, turn on those who can, and delude themselves.

Why do you think 99% fail at trading. It's not for want of trying. It's just that, brutally, they can't do it. Because of this fact, it would appear that most posters on this site will end up losing in the end - not something they want to admit to themselves.

That's why there are so many books, courses, seminars about. Headed by people who know total f*ck all, attended by people who are just as clueless. Some people actually take notes at these gatherings.

It's like everything else in life: there are those who CAN do it, and those who can't. Those who can't end up doing something else because they have no choice.

But because we are on a bulletin board, somehow it gives posters the right to think: "I'm on this bulletin board, I'm active in this community, therefore I have the right to succeed".

And just like everything else in life, those who attain the peak can only converse and "share" with those who have also done it. It's hierarchical and unfair, but that's the way it is. If they didn't do this, they'll constantly get their heads drilled, or ridiculed, or have to put up with upstarts, aggressors (who don't believe their abilities are possible), morons, and tedious questioners and ignorant information beggars.

The top men who taught me will not converse with the public, because they get tired of explaining again and again their work. They are only interested in the best students, and have no time for morons, lazy apathetic people. And, bluntly, the public won't understand them anyway, and no matter how they try to explain the public will still not understand.

 

[porph]

And here is a classic example.

Everyone thinks they can do it, but most will never admit that they NEVER can.

They keep on waffling, talk amongst themselves, turn on those who can, and delude themselves.

Why do you think 99% fail at trading. It's not for want of trying. It's just that, brutally, they can't do it. Because of this fact, it would appear that most posters on this site will end up losing in the end - not something they want to admit to themselves.

That's why there are so many books, courses, seminars about. Headed by people who know total f*ck all, attended by people who are just as clueless. Some people actually take notes at these gatherings.

It's like everything else in life: there are those who CAN do it, and those who can't. Those who can't end up doing something else because they have no choice.

But because we are on a bulletin board, somehow it gives posters the right to think: "I'm on this bulletin board, I'm active in this community, therefore I have the right to succeed".

And just like everything else in life, those who attain the peak can only converse and "share" with those who have also done it. It's hierarchical and unfair, but that's the way it is. If they didn't do this, they'll constantly get their heads drilled, or ridiculed, or have to put up with upstarts, aggressors (who don't believe their abilities are possible), morons, and tedious questioners and ignorant information beggars.

The top men who taught me will not converse with the public, because they get tired of explaining again and again their work. They are only interested in the best students, and have no time for morons, lazy apathetic people. And, bluntly, the public won't understand them anyway, and no matter how they try to explain the public will still not understand.

I do just fine buddy. It sounds like you are well versed in losing but lack any sort of knowledge about winning..