Permanent edge

[black bear]

The Rockets Edge

There is a permanent edge: skill. You want to make sure you made money because you have the skill. Having this skill means anticipating changes in the market and not getting caught doing the same thing that 'worked' in the past when things change. After all, why would there be a visible, unchanging edge sitting there to be exploited for years? If you are not ahead of your competetors, eventually you will lose to them. Incidentally, this is why I never advise people to risk 2% of their capital. When a trader finds something that works, he should press hard, win and quit while he is ahead.

Those with the skill to understand the makets are the only ones who will be around for a long time. Ask yourself if you are one of them.

Good question, and one close to my heart.
I found something that works and has been giving me at least 30 pips nearly everyday for the last year or so. However, about 6 months of that was just papertrading as I am cautious by nature.

I dont think ill ever find something like this again, and the fear of it just stopping working one day is always in the back of my mind.

However, I know traders who have used the same methods profitably for at least 5 years (some alot more)so either way, hopefully i still have a few years left...

Hi FX

"After all, why would there be a visible, unchanging edge sitting there to be exploited for years? "

I see my edge in every instument price and any market and its been about for ever, the skill you refer to is just control of your emotions and yourself when the money is down, most blow up and failure to admit that to yourself just makes progress impossible.

Its hard to admit the reason your failing is because you have just found out your weak and not the strong person you have always imagined yourself to be. You may infact be a very strong person away from the markets. The plan and your market observations are correct but ..........

It cannot be me thats the problem, oh no = last stone to get turned over.

:idea::idea:

Right lets find something else, another filter perhaps a magic moving average will do the trick = keep you busy thats about it really.


Hi keano

Thats because you do not understand your own edge and why it works imho,

Its not magic or special many will use the same method, perhaps disguised behind various settings ma sma macd vol multi tf view of the market etc

Find the common ground in all methods and your confidence will be there in one second flat and you will no its permanent imho

Skill in application well thats personal to the individual but knowledge just is. Sure if I gave my method to a more able individual new to trading he would make more of it than me and take it ......as far as his or her skill would allow.

Example, snooker my 1st love, you can learn all the shots, you can learn all the tactics, you can learn all the positional shots =everything

If one thing is missing and you do not realise its importance your F..cked, you will fold under pressure every time, you will make small errors and think this or that is responsible for them.

Edge at Snooker == your Strike and how pure it is, you can improve it and practice it till its almost automatic if your not a natural (skill) but you will never ever strike like the Rocket

Never so forget it and play your own game and improve your Strike by knocking the simple balls in pockets with a pure strike ======KISS

YouTube - Ronnie "The Rocket" O'Sullivan fastest 147

Enjoy the debate again all & the search or whatever it is to you :clover:

Latter

 

[firewalker99]

Edge at Snooker == your Strike and how pure it is, you can improve it and practice it till its almost automatic if your not a natural (skill) but you will never ever strike like the Rocket

Never so forget it and play your own game and improve your Strike by knocking the simple balls in pockets with a pure strike ======KISS

Enjoy the debate again all & the search or whatever it is to you :clover:

Latter

I'm going to play devil's advocate here for a minute.

Do the balls you play with change in snooker? (I doubt it)
Do the rules change in snooker? (perhaps, but not very often)
Do your competitors change (probably, and over time a lot)

Which elements affect your game? Once you're able to pocket a ball with a certain precision, it's likely you won't lose this skill. But does it mean you'll win each and every game? What if you were the world's best player, but suddenly a new guy comes around and wipes the table with you. Have you lost your edge? Probably not. But is it still as profitable as before? Not likely.

Hope you get my point.

 

[black bear]

I'm going to play devil's advocate here for a minute.

Do the balls you play with change in snooker? (I doubt it)
Do the rules change in snooker? (perhaps, but not very often)
Do your competitors change (probably, and over time a lot)

Which elements affect your game? Once you're able to pocket a ball with a certain precision, it's likely you won't lose this skill. But does it mean you'll win each and every game? What if you were the world's best player, but suddenly a new guy comes around and wipes the table with you. Have you lost your edge? Probably not. But is it still as profitable as before? Not likely.

Hope you get my point.

FW

The emotion is the same = exact FW

I was going to highlight the important ones but ===no need at all

The Five Fundamental Truths

1. Anything can happen.
2. You don’t need to know what is going to happen next in order to make money.
3. There is a random distribution between wins and losses for any given set of variables that define an edge.
4. An edge is nothing more than an indication of a higher probability of one thing happening over another.
5. Every moment in [a game] is unique.

The Seven Principles of Consistency

1. I objectively identify my edges.
2. I predefine the risk of every [betting decision].
3. I completely accept the risk or I am willing to let go of the [hand].
4. I act on my edges without reservation or hesitation.
5. I pay myself as the [game] makes money available to me.
6. I continually monitor my susceptibility for making errors.
7. I understand the absolute necessity of these principles of consistent success and, therefore, I never violate them.

All tables plays different, granted the ones you see on telly are pretty close to each other

The Strike of the cue ball is whats important and nothing else FW, you do not even need the best eye sight. it obviously helps if yours is pretty good Study how the eyes work and you will understand what I mean.

If you improve your Strike on a simple shot by constant practice and except that is the single most important piece of the jigsaw, your ability to Strike the cue ball PURE is the limit to your ability

If I have never met a player, I can tell in 3 shots if he is any good and consistant


The overlap is amazing in many ways (intraday / screen monkey trading ) very close imho anyway

Do trading rules change = the important ones FW ?

Latter

 

[PKFFW]

Markets are changing all the time.

No they aren't, and I can prove it.

Before you jump to the assumption I am having a go here for the sake of it, I'm not. I'm sincerely interested in hearing your response.

Is your statement akin to saying the ocean never changes. The ocean is simply the ocean afterall. The dynamics of the ocean may change.....may be high waves and lots of chop during a big storm one day and calm and serene the next. Both simply different expressions(for want of a better word) of the one ocean.

If something about a market remains remarkable then you don't understand it and therefore it isn’t an edge.

Taking the analogy of the ocean, what if one is very competant in sailing during calm seas. Maybe this person has been sailing the waters near their home for many years. Very experienced and all that. Yet every time the weather gets rough they run into trouble and can't handle the boat very well. Maybe they get sea sick and this impinges on their ability. So they simply decide they wont sail during rough weather.

Would you say they don't have skill(or an edge) as a sailor because they can't sail well in rough weather? They don't understand this aspect of sailing and therefore they don't have any skill or edge?

Cheers,
PKFFW

 

[nine]

Taking the analogy of the ocean, what if one is very competant in sailing during calm seas. Maybe this person has been sailing the waters near their home for many years. Very experienced and all that. Yet every time the weather gets rough they run into trouble and can't handle the boat very well. Maybe they get sea sick and this impinges on their ability. So they simply decide they wont sail during rough weather.

Would you say they don't have skill(or an edge) as a sailor because they can't sail well in rough weather? They don't understand this aspect of sailing and therefore they don't have any skill or edge?

Nice Analogy.

My view is that it is possible to have a permanent edge but there are times when it won't work on a particular market with a particular timeframe. Not working is important because over time people will recognize the edge or something profiting from related mechanisms and the failure period clears them out. This keeps an edge that is being recognized by too many people fresh.

A characteristic of a "permanent edge" is that it needs to be defined in the markets terms or at least adapted to those terms. So stops and targets might be defined by atr or if you're discretionary, when you notice that XXX period range has risen or post entry noise has risen then adjust your entries, stops and targets to the market. So to me the edge is not the current exact rules used but rather the principle of market behaviour that you are exploiting.

Wasp, maybe you need to explore different bar timeframes or something similar and see if the edge still exists but has evolved or mutated slightly.

 

[new_trader]

One must consider structural changes as well. (Uptick rule changes, Margin requirement changes, regulatory changes, Policy changes, etc...) Add that to volitility, Asset rotations and the like.

MHO markets are always changing
Skills allow to adapt and stay within the trading plan. Permanent Edge, no. Permanent KNowledge yes.

Lets look at this from a mechanical trading perspective:

1) How many S&P 500 Futures indicies are there in the world?

1 or many?

2) How many people are currently making a profit right now trading the S&P 500 Futures?

Hard to say, but we could safely assume it's more than 1 and less than the population of the world.

3) What are the chances that all of these people are trading EXACTLY the same system?

I would say the chances are less than 100% and probably very close to 0%. Would you agree?

4) What are the chances that all of these people back tested their system with identical historical data?

Discounting the possibility of erroneous data, I would say that the chances of this are 100%


So, with n number of people, trading n different types of systems on the same index back tested on identical historical data, you feel you are in a position to say "The market changes all the time". So, what is the point of back testing? If the market "changes” next week do you now back test your new system with only 1 week worth of data because the market is now completely different to the last 25 years of historical data? Or do you conclude, more logically, that your system wasn't bullet proof to begin with and what you had was only a temporary edge that was curve fitted or optimised for what you observed?

 

[new_trader]

I'm going to play devil's advocate here for a minute.

Do the balls you play with change in snooker? (I doubt it)
Do the rules change in snooker? (perhaps, but not very often)
Do your competitors change (probably, and over time a lot)

Which elements affect your game? Once you're able to pocket a ball with a certain precision, it's likely you won't lose this skill. But does it mean you'll win each and every game? What if you were the world's best player, but suddenly a new guy comes around and wipes the table with you. Have you lost your edge? Probably not. But is it still as profitable as before? Not likely.

Hope you get my point.

What if you didn't make money from actually playing snooker but instead from betting on other players of the game :idea:

What if you studied every element of the game, such that you could determine with with a high degree of accuracy who will win :idea:

Then it doesn't really matter who is the best player in the world, does it? :idea:

 

[firewalker99]

So to me the edge is not the current exact rules used but rather the principle of market behaviour that you are exploiting.

 

[firewalker99]

What if you didn't make money from actually playing snooker but instead from betting on other players of the game :idea:

What if you studied every element of the game, such that you could determine with with a high degree of accuracy who will win :idea:

Then it doesn't really matter who is the best player in the world, does it? :idea:

Interesting point. But... although you know that those who are amongst the best, practice the most and work the hardest to improve their play (they might also have more 'means' available to them), there's no way of knowing that all of a sudden there might not come a new player around that puts the whole establishment in question by using a slightly different method and beating all the rest from seemingly nowhere!

All right, I don't know a whole lot about snooker. But looking at other sports, we see it happen a lot. New people come into the game, they surprise the 'oldies' by driving (eg autosport) or playing (eg. tennis) slightly more aggressive, a slightly different approach. But there they are, rising to the top of their game, with players who've been in the game for years surprised how this is possible.

In the markets you already know who's going to come out on top. That doesn't mean they don't have to adopt their play from time to time, to compensate for changes in the environment or "the rulebook".

 

[new_trader]

Interesting point. But... although you know that those who are amongst the best, practice the most and work the hardest to improve their play (they might also have more 'means' available to them), there's no way of knowing that all of a sudden there might not come a new player around that puts the whole establishment in question by using a slightly different method and beating all the rest from seemingly nowhere!

All right, I don't know a whole lot about snooker. But looking at other sports, we see it happen a lot. New people come into the game, they surprise the 'oldies' by driving (eg autosport) or playing (eg. tennis) slightly more aggressive, a slightly different approach. But there they are, rising to the top of their game, with players who've been in the game for years surprised how this is possible.

In the markets you already know who's going to come out on top. That doesn't mean they don't have to adopt their play from time to time, to compensate for changes in the environment or "the rulebook".

I don't know where you are trying to go with this but I get the impression you will keep inventing hypothetical ways of playing a very simple game just to prove a point. You could keep inventing a smarter and smarter mouse trap until eventually the mouse can't even work out how to use it and as a result, never gets caught. Sort of defeats the purpose of the trap doesn't it?

 

[firewalker99]

I don't know where you are trying to go with this but I get the impression you will keep inventing hypothetical ways of playing a very simple game just to prove a point. You could keep inventing a smarter and smarter mouse trap until eventually the mouse can't even work out how to use it and as a result, never gets caught. Sort of defeats the purpose of the trap doesn't it?

All right I'll try to be more specific.

FXScalper2 said a pattern is not an edge, but rather something that temporarily presents itself and where one should make as much money out as possible.

I disagree. If you thoroughly understand what creates the pattern in the first place, i.e. trader behaviour, there's no reason to believe that all of a sudden the pattern will disappear. Like I said, I'm not a pattern trader in the strict sense of the word, but I've looked at enough historic charts to know that the underlying psychology hasn't changed.

What's a pattern? Cup with handle? Most would agree. Double bottom? Perhaps. Selling climax? Hmm. Where's the line between pattern and principle? All of the aforementioned examples presented themselves 100 years ago as they do today. What you do with it and how you trade it, is your edge. But it's not the pattern that fails, it's the trader.

 

[new_trader]

All right I'll try to be more specific.

FXScalper2 said a pattern is not an edge, but rather something that temporarily presents itself and where one should make as much money out as possible.

I disagree. If you thoroughly understand what creates the pattern in the first place, i.e. trader behaviour, there's no reason to believe that all of a sudden the pattern will disappear. Like I said, I'm not a pattern trader in the strict sense of the word, but I've looked at enough historic charts to know that the underlying psychology hasn't changed.

What's a pattern? Cup with handle? Most would agree. Double bottom? Perhaps. Selling climax? Hmm. Where's the line between pattern and principle? All of the aforementioned examples presented themselves 100 years ago as they do today. What you do with it and how you trade it, is your edge. But it's not the pattern that fails, it's the trader.

A pattern is not an edge, that is correct. Psychology hasn't changed...ahhhh...now that makes sense!

And there you have it!

 

[Paul71]

Is there such a thing?

I thought I had one and up till a couple of weeks ago, it had been solid for a year and a half. Not actually checked prior as yet but it was a simple recurring price action that gave consistent returns with minimal risk and high strike rate.

I had concentrated on primarily a single market but it also works on others too as checks are made (spot FX at least)....

Whilst it still continues to work on some, the original market of choice has dramatically changed over the last few weeks to the point I hardly recognise it, yet still it works on others.

This could be down to a number of things and it could just be a mute period for the original market and swings and roundabouts are inevitable.

Anyhow, not that I wish this to be about me but rather;

Do you think it is possible to have a permanent edge, ie a set-up based on previous occurances of similar action that will consistently repeat itself forever or do the markets and the traders change too much for it to be possible?

Hi Wasp, good question.

Yes of course there is. What i see happening on the indices happens on the FX markets, and commodity and others.

Contracts are offered and bid for at certain prices, the charts and volume(not FX) tell you all you need to know about what prices are fancied by the players or participants.

The edge, from a retail perspective, is about learning what everyone else is thinking through price action and volume....if you're into TA that is.

Nice thread.

 

[FXSCALPER2]

There are games where you KNOW for certain that there is an edge. If you own roulette tables and get lots of people to play on them, you can just concentrate on running the business well, because the edge is fixed and there is nothing for you to do.

The financial markets are obviously not like like that. This is why I get bored when people talk about some pattern that 'works'.

 

[firewalker99]

There are games where you KNOW for certain that there is an edge. If you own roulette tables and get lots of people to play on them, you can just concentrate on running the business well, because the edge is fixed and there is nothing for you to do.

The financial markets are obviously not like like that. This is why I get bored when people talk about some pattern that 'works'.

It's not the pattern that 'works', it's what the trader does with it and the principles that create it in the first place. Those principles will continue to work, because they are created by trader behaviour, not because there are a great number of people focusing on that pattern.

There's a chance you might have a different definition of pattern than I have. So perhaps you could give an example of what is a pattern and what is not, to make sure that we are talking about the same thing.

 

[Lee Shepherd]

Apologies for jumping in.

With roulette tables, your right, they're are profitable so sit back and enjoy the profits because the edge is already applied.

BUT: The actual edge comes from getting the people in through the doors to play, this will entail advertising of some kind and position of casino ect. Both very important and this is where the edge would need to be applied.

The table is easy, getting people to play them is a different matter.
This is where the edge comes into play.

The financial markets require an edge from the trader - however he plays his edge is whether or not he is successful consistantly.

There are games where you KNOW for certain that there is an edge. If you own roulette tables and get lots of people to play on them, you can just concentrate on running the business well, because the edge is fixed and there is nothing for you to do.

The financial markets are obviously not like like that. This is why I get bored when people talk about some pattern that 'works'.

 

[wasp]

very bizzi ATM but just wanted to thank all for the input...

Seems to me the crux of most's perception is that a 'permanent edge' is NOT a recurring event in the markets (S/R, trendline bounce, dips, H&S, triangle etc) but rather the SKILL to open a blank chart at any given time and essentially know what is more than likely to happen, rather than looking for certain criteria.

 

[Paul71]

There are patterns, psychological patterns, born out of greed and fear, and i'm not on about triangles or anything like that.

Take an offered price rejection in a bull market for example, that's the pattern, what's happening next, what do the players want out of the market, no one wants to buy dog poo contracts.

So we roll the game on, now players are getting more confident about the rejected price and so on and so on.

Getting in on the act, the right act, is the edge. It's permanent when you get the knack of it.

 

[nine]

Variant perception gives us an opportunity for profit. Thankfully.

 

[black bear]

Seems to fit so...........Choose your own wave / SET

"Taking the analogy of the ocean, what if one is very competant in sailing during calm seas. Maybe this person has been sailing the waters near their home for many years. Very experienced and all that. Yet every time the weather gets rough they run into trouble and can't handle the boat very well. Maybe they get sea sick and this impinges on their ability. So they simply decide they wont sail during rough weather.

Would you say they don't have skill(or an edge) as a sailor because they can't sail well in rough weather? They don't understand this aspect of sailing and therefore they don't have any skill or edge?

Cheers,
PKFFW"

Very good post ~

seems to fit so ................

From NQ in Cornwall ~ Fistral Beach you get a great view of natures market at work watching the surfers catching waves, depends on their skill and experience which waves they can catch and for how long.
Primary Waves and their smaller brothers and sister’s
You see it all ~ Scalpers going for short quick rides right up to the large position players who will sit for hours waiting for the right Wave Set, they climb up and stop out many times, (short paddle back to take off) then they are up and you just no this time they’ll make every move at the correct time , skipping effortlessly from set to set avoiding all the dead waves and dumps and finding the true Wave that will carry them all the way to shore. It’s a hell of a long paddle back to take off and a long wait for another good Wave, they don’t mind they know it’s worth it.
Cribber to the beach only top quality wave riders make this one
(very large wave that starts up when the swell is 5ft +)
You see surfers making careful board selection ~ Long board or Short true honest
You see all the surfer’s all gathered up out there watching the Sun going down, comparing notes etc best board/Wax/ area to sit and wait. Looks like a great forum out there.

Direct PM answer to ~ am I a Surfer Posted to ~

The eye opener is watching the experienced Surfer (trader)
ride the waves, watching him stop out then try again all choosing different spots for take off , no right or wrong just a good take off spot for their skill level

No man I am not, but do live where stated, moved there 7 yr ago. I appreciate all skills done well in any field.

The Surfers attitude to life if he is a true
(not a wk end dude with is brand new VW) is probably the best traders attitude to adopt ~ IMO

They care about surfing, life interacting with others, They are not competitive by nature and they don’t seem to bother about tomorrow much just the here and now. They ride the waves to become one with nature and don’t care to much about money as long as they have enough that’s cool

There lack of attachment to money gives them an edge in what they take part in LIFE.

I removed the money from the trading game 6 months ago when I realised I was just constantly breaking even. Thought about what I new, thought what’s logical, which waves do I want to ride, wrote it down and traded it on a demo account, Great results for my level of ability.

Went Live a few months ago / still got me part time job (everybody part time in NQ) going ok not setting world on fire yet, but do you now what, I don’t care anymore, I am in full control of my method and me, and if it don’t work out and I cant become a full master of this trade, I am having FUN learning and taking part. The downsides covered

So ye I am a surfer, we all are if we choose to be,

I am a Surfer on the snooker table, a Surfer at work and most of all I am a Surfer when I trade.

If you feel the heat, feel uncomfortable in any way, what ever you’re doing, you’re doing it wrong "my Dad said that"

Step back and say what can the surfer do for me and the search goes on "I said that"


Enjoy the search

Latter Suns up down here