The 'Edge'

[dbphoenix]

DB, take a break and play with a demo account until you get your confidence back. you can get nowhere operating out of fear.

I appreciate your concern, rt, but the quote was from a newbie post. I'm doing just fine, thank you.

In case you're interested, here's a follow-on post:

The lender is a relative and he will forgive me (I know him very well) when it comes to the point. I borrowed 25k, and it is not his last savings. He still gonna be frustrated and that is killing me. I can't stand myself when I frustrate people.

I already have a job but probably will have to find another one because this won't cover my current living.

I've been trading for 5 years, more of a swing type of a trader/gambler. The results were so-so, zero-even, not losing but not earning much. Until last summer when I started betting on earnings and mostly was right. That gave me a lot of confidence and... well, decided I can do anything. Rigth after I borrowed more money things started go wrong. I thought it's temporary, but I was wrong, more I tried more I failed. Now I blew all my money I had and my relative's too.

Note that this "newbie" has been at it for five years.

 

[Strategic Trader]

every trade done has a 50/50 opportunity for success - less spread and commision

make sure you have been profitable for at least 3 years and making 6 figures for those 3 years - before you feel you have cracked it!

and if you have an edge - don't sit on it!

 

[techst]

Poor guy, but surely you only get i that sort of trouble if your not following your rules about money management.

 

[wisestguy]

to answer the question :

1) the edge means simley to have a trading methid that consistently beats the market over time .

it constitutes mainly an excellent trading system initially , and then includes risk control , trade management , profits maximisation , trade structure . all becoming equally important over time.

2) I believe the easiest and superior way is to be BORN with a natural affinity to the markets , the way an great artist has affinity with images . if you have this it won't be long before you are drawn to the market and discover yourself , and improve dramatically with risk control etc.

if you don't have this then , you can try to self educate yourself in the hope that you can pick up whatever the edge is . it can be done , but the road may be hard and expensive.

Or you can try being taught , although I would say that a lot of courses are outright bunk with outrageoous claims .

that is not to say that you cannot learn how to win or there are no good teachers . there are !

but finding them is few and far between , mainly because they are busy trading.

3) partly answered in (1) , in a successful system , an edge will be all encompassing striding all areas of your trading .

 

[dbphoenix]

Poor guy, but surely you only get i that sort of trouble if your not following your rules about money management.

AFAIK, he didn't have any.

This is typical of the stories one read in '00/'01. I felt sorry for them then. Not so much now.

 

[JumpOff]

I appreciate your concern, rt, but the quote was from a newbie post. I'm doing just fine, thank you.

Ha! I thought it was Barjon, using his new moderator privileges to bring us an early April 1.

JO

 

[barjon]

Ha! I thought it was Barjon, using his new moderator privileges to bring us an early April 1.

JO

watch it jo :cheesy: I've always followed the maxim never trade with more than you can afford to lose. The ole shirt's been tattered and frayed and down to just collar and cuffs a few times I can tell you

good trading

jon

 

[dbphoenix]

I used to think that. But it resulted in a slow bleed. So I decided instead never to trade what I hadn't tested, and voila, the bleeding stopped.

 

[barjon]

Db

Well, that's definitely a more positive frame of mind to be in. Mind you I've tested plenty of things that have then gushed red (alright, I know - test properly)

jon

 

[dbphoenix]

I've also tested plenty of things that didn't yield consistent profits. But by finding out before putting money at risk, whatever losses occurred (and which are inevitable) had been incorporated and were expected.

 

[nine]

Poor guy, but surely you only get i that sort of trouble if your not following your rules about money management.

All money management can do is slow down the bleeding.

You need a tested edge with postive expectancy and then the discipline to trade it as tested. Money management is no more a holy grail than any of the other components of trading.

 

[wisestguy]

ah , but MM for the advanced trader is not just essential , but more than just pure MM.

that said , it is obvious that you need a consistent winning edge.

 

[blackcab]

So far we've defined an edge as something that makes your performance superior to one of: a) a random trader, b) the market, c) the average trader (mean/median/mode?).

it constitutes mainly an excellent trading system initially , and then includes risk control , trade management , profits maximisation , trade structure . all becoming equally important over time.

That lists some of the important aspects of a trading plan. So inasmuch as their quality contributes to your performance, and an edge is something that gives you superior performance, they can contribute to your edge.

E.g. if you use a system that gives you superior entries or exits, or you are superior in not deviating from your plan, or you use a superior risk control plan that gives you an inferior likelihood of wipeout, then you have an edge in that respect. But if you're inferior in any other aspect that'll reduce your overall score, or edge, so you need to be either fantastically superior in a few or slightly superior in many aspects to have an overall edge.

Is it just that?

 

[TWI]

Here is an example of an edge.
Take a portfolio of products such as CRB index constituents. Consider e.g. LRA for each to determine if considered in no trend, trend or overextended. If in trend then buy/sell accordingly. If required hedge with index.
here LRA gives you an edge over the index. Works with any index constituents.

 

[dbphoenix]

So far we've defined an edge as something that makes your performance superior to one of: a) a random trader, b) the market, c) the average trader (mean/median/mode?).



That lists some of the important aspects of a trading plan. So inasmuch as their quality contributes to your performance, and an edge is something that gives you superior performance, they can contribute to your edge.

E.g. if you use a system that gives you superior entries or exits, or you are superior in not deviating from your plan, or you use a superior risk control plan that gives you an inferior likelihood of wipeout, then you have an edge in that respect. But if you're inferior in any other aspect that'll reduce your overall score, or edge, so you need to be either fantastically superior in a few or slightly superior in many aspects to have an overall edge.

Is it just that?

Not really. As I said earlier, if you don't have a consistently profitable trading strategy, then your superiority in any other area doesn't matter. And unless your strategy is based on the probability of one outcome occurring over another, then it is unlikely to be consistently profitable, except perhaps in a simulation.

 

[wisestguy]

No

So far we've defined an edge as something that makes your performance superior to one of: a) a random trader, b) the market, c) the average trader (mean/median/mode?).



That lists some of the important aspects of a trading plan. So inasmuch as their quality contributes to your performance, and an edge is something that gives you superior performance, they can contribute to your edge.

E.g. if you use a system that gives you superior entries or exits, or you are superior in not deviating from your plan, or you use a superior risk control plan that gives you an inferior likelihood of wipeout, then you have an edge in that respect. But if you're inferior in any other aspect that'll reduce your overall score, or edge, so you need to be either fantastically superior in a few or slightly superior in many aspects to have an overall edge.

Is it just that?

No , you have misunderstood me .

you'd better re-read the original . so many people think that have understood something from a cursory read to find that they have missed the point . then like many bfore them , the message gets re-interpreted in a convulted academic way .

an ' excellent trading system initially ' means : a system that wins more than it loses significantly in $ TERMS , not this piddly rubbish of giving more win trades than losses.
and this comes FIRST before anything else.

I'm going to pre-empt you and answer your Q . a system can produce 75 % winners , but the 25 % losers in real $ terms could be massive , thereby wiping you out .

so pointless having whatever % of winners if the losers in $ terms are greater.

one of the great cheats of moderntrading scams favoured by some even on T2W.

 

[dbphoenix]

I'm going to pre-empt you and answer your Q . a system can produce 75 % winners , but the 25 % losers in real $ terms could be massive , thereby wiping you out .

so pointless having whatever % of winners if the losers in $ terms are greater.

one of the great cheats of modern trading scams favoured by some even on T2W.

Although one will read that the % of winners can also be less than the % of losers as long as the winners are sufficiently profitable, one's management is superior, etc.

Yes, theoretically, one can "win" less than 50% of the time if his profits sufficiently outweigh his losses. But if his real-time real-money test begins with a string of the losses anticipated by his backtest, he'll be out of the game almost before it begins. In fact, one can be left high and dry even if his % of wins outnumber his % of losses, as mentioned above, if there is insufficient control of the amount of loss OR if the losses occur in sufficiently high numbers at the beginning of the trial (Magee explains this nicely in his book).

There's the message board world and the real trading world. The two do not necessarily have anything to do with each other. The beginner who wants to avoid bankruptcy would do well to test everything to determine whether or not it is in fact true (one currently popular thread with hundreds of posts shows no evidence of anyone ever having tested the setup in question), then determine whether or not it can be made into a consistently profitable trading strategy (this does not, of course, apply to recreational traders).

 

[blackcab]

No , you have misunderstood me .

you'd better re-read the original . so many people think that have understood something from a cursory read to find that they have missed the point . then like many bfore them , the message gets re-interpreted in a convulted academic way .

I can't see where I misunderstood you, except where you and Db said it's no good having an edge in just some aspects, you need it in all aspects.

I asked "is it just that?" because the thread just seems to be "what's an edge?" "something that gives you superior performance". Maybe I'm looking for more than is there.

an ' excellent trading system initially ' means : a system that wins more than it loses significantly in $ TERMS , not this piddly rubbish of giving more win trades than losses.
and this comes FIRST before anything else.

I'm going to pre-empt you and answer your Q . a system can produce 75 % winners , but the 25 % losers in real $ terms could be massive , thereby wiping you out .

so pointless having whatever % of winners if the losers in $ terms are greater.

Yes, I wasn't thinking of that at all, but of course it's true.

 

[dbphoenix]

I asked "is it just that?" because the thread just seems to be "what's an edge?" "something that gives you superior performance". Maybe I'm looking for more than is there.

Depends on how you define "performance". "Superior performance" can mean sticking doggedly to an inferior strategy. Or having more wins than losses, even though the losses are uncontrolled. Which is why I'm specific about consistent profitability. If it's not consistently profitable, you have no edge.

 

[wisestguy]

Although one will read that the % of winners can also be less than the % of losers as long as the winners are sufficiently profitable, one's management is superior, etc.

Yes, theoretically, one can "win" less than 50% of the time if his profits sufficiently outweigh his losses. But if his real-time real-money test begins with a string of the losses anticipated by his backtest, he'll be out of the game almost before it begins. In fact, one can be left high and dry even if his % of wins outnumber his % of losses, as mentioned above, if there is insufficient control of the amount of loss OR if the losses occur in sufficiently high numbers at the beginning of the trial (Magee explains this nicely in his book).

There's the message board world and the real trading world. The two do not necessarily have anything to do with each other. The beginner who wants to avoid bankruptcy would do well to test everything to determine whether or not it is in fact true (one currently popular thread with hundreds of posts shows no evidence of anyone ever having tested the setup in question), then determine whether or not it can be made into a consistently profitable trading strategy (this does not, of course, apply to recreational traders).

- ain't no theory . I have made 5-10x my base cap. using the big winners small losers edge.

- any systems that does not produce winners almost straight off ( assuming decent risk control ) is a pile of you know what . part of a good system is that it will put you in only on high probability win situations.

a high % of W's system could still produce a long list of losers FIRST . this does not depend on what kind of system one uses , that's just the market being a b#$tch.

- real world or not a lot of people subscribe to the fallacy I described. have you ?