well you know guys this is something that I've come across a couple of times since i joined trade 2 win, the best dialouge was between me and bramble on one of arabians threads. ill try and find it after if finished this post.
OK now no flaming me for saying it OK?
At the very shortest of timeframes, as in on a trade by trade basis, markets are moved by order flow and imbalances between volume and liquidity. From the simple case of slippage, to a raft of orders buying (say) all the available liquidity at one price and testing the market to auction one tick higher, and the many different ways these kind of things play out. At the very longest of timeframes, markets are driven by the domestic and foreign policies of Governments - fiscal and monetary policy, trade tarrifs and agreements, and so on and so on.
It does not seem very sensible to implement a long term edge on a short timescale, or vice versa; The euro is not necessarily fundamentally undervalued because it won't go bid... nor does it mean that the SP500 should necessarily tick down because Sarah Palin and her protectionist ideology is losing voter confidence. See what I mean?
Now, in the reality of things, no timescale is wholly independent of influence from "other timescale" factors - the activity on every timescale is a function of several variables, and the balance between each factor varies as you move along the investment horizon. I personally imagine it like the balance between a push and pull factor. markets go from being wholly "pushed" by volume/liquidity imbalances, to being "pulled" to fair value by the changing macroenomic environment (think gaps at NFP).
So, because that it the way I understand financial markets to work, I cannot agree that an "edge" in one arena is applicable in another; if my "edge" is identifying companies that are attractive takover targets and IMO underpriced by the market, I would not expect that "edge" to be borne out over the next tick or two. Neither would I expect to hold Japanese Yen for 5+ years if my "edge" was fading liquidity imbalances.
See? You need to trade on a timescale that is appropriate for the half-life of your edge.