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The question of an edge

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Market Wizard
Gits (Hooglede) Belgium
Trading Experience: Master
Platform: NinjaTrader, Proprietary,
Broker/Data: Ninjabrokerage/IQfeed + Synthetic datafeed
Favorite Futures: 6A, 6B, 6C, 6E, 6J, 6S, ES, NQ, YM, AEX, CL, NG, ZB, ZN, ZC, ZS, GC
rleplae's Avatar
Posts: 2,966 since Sep 2013
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kevinkdog View Post
1. no
2. yes

Discretionary traders can indeed have positive expectancy. The approach might be impossible to backtest, though.

Regardless of trading style, you can always use actual real money results to determine expectancy/edge.

Some methods cannot be backtested, and backtests can easily be faked/manipulated/etc. Backtests are definitely not foolproof.

As for your list of discretionary traders, I have my doubts about some of them having an edge (or even trading at all), and I'll leave it at that.

I Agree...
I can even say more..

There can be an 'edge', which by eye-balling the screen is very clear, why long, why short, why don't touch
once you want to quantify it (at least in classic rule-based system) and program it, it becomes very very
difficult as there is always a little 'but', which is evident to the human eye/brain, but when not programmed
it doesn't count...

Today half of my strategies are classic rule based, if / then and work OK
other half are machine learning, artificial intelligence based

I'm currently working on a small new project, and teach my kid (university student) the magic of machine
learning. as a example i hope to illustrate the result of a rules based system compared to a machine learning
system. But on the same concept... The goal of the exercise is : manual, trial/error/optimisation of features
and parameters, compared to automatic feature extraction... will be a good interesting exercise

More to follow this month...

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