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How to develop an edge?


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How to develop an edge?

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  #1 (permalink)
DF, Mexico.
 
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Hi friends.

I always read everywhere i have to develop a methodology that works for me and fits my personality. The thing is, i don't even know what that means. I'm currently reading Van Tharp and Brett books and they explain for example that according to my life experiences i have developed a bias, a way of looking at the market. But i think the problem with me lies in that i can not recognise that bias. I know my personality out of the markets (like shy, introverted and stuff)because i've read some books about personality to help me, but i don't know what thinks to look for in terms of market. I would appreciate so much if you could help me with some resources (books, websites, webinars, blogs, people, etc).

I think all the material out there is focused on people who already have a methodology and just need the confidence on executing it (post methodology discovery). But at the moment i haven't found anything pre methodology discovery.

So far the only thing i know is that i don't believe in technical indicators.

Thanks.
Rhuz

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  #3 (permalink)
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cool post - this is more of a "place holder" to remind me to come back and elaborate when I have the time, meanwhile...

"edge" is thrown around a lot - so much so that I'm not convinced everybody deeply understands what it means. Firstly, be sure you know what it really means. Douglas does a great job of breaking it down


ignoring indicators, just looking at other peoples journals who are kind enough to post where their entries and exits are on charts is a great place to start.
losing characteristics include:
  • a bunch of trades where positive and negative outcomes are of similar amounts, or worse, losers are larger than winners
  • trading against the trend, trying to repeatedly pick tops, or bottoms
  • over trading - not trading near the edge - but lots of entries and exits within a predominant move
  • the most important point - no testing to see the presence of an edge by looking at the outcome of a whole bunch (say 20-40) trades at a time

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  #4 (permalink)
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If you can take advantage of the mistakes of other traders on a consistent basis then you are on your way to find an edge. The next step is to find how these mistakes materialize on a chart and then begin to train your brain to recognize them as they emerge on the right side of the screen. Finally the hardest part, putting your money on the line and root-out the mental blocks you'll surely discover.

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  #5 (permalink)
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Below is a passage that I recently posted to another thread. It should be lessons 1-100 on what to NEVER do in attempting to developing an "edge." It's like poison candy to starving children, for some reason.
------------------------------------------------------------------------------------------------------------------------------------
Another snippet from "Gambling Theory and Other Topics" by Mason Malmuth.

"Any competent statistician will tell you that one should first form a hypothesis and then collect data to either (statistically) confirm or reject the hypothesis. The way NOT to go is to collect data first and then look for patterns or trends to exploit. The reason that collecting data first is flawed is that with a large body of data, pseudo-patterns, which are logically flawed, will appear."

Peace,
Paige

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  #6 (permalink)
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rhuz View Post
Hi friends.

I always read everywhere i have to develop a strategy that works for me and fits my personality. The thing is, i don't even know what that means. I'm currently reading Van Tharp and Brett books and they explain for example that according to my life experiences i have developed a bias, a way of looking at the market. But i think the problem with me lies in that i can not recognise that bias. I know my personality out of the markets (like shy, introverted and stuff)because i've read some books about personality to help me, but i don't know what thinks to look for in terms of market. I would appreciate so much if you could help me with some resources (books, websites, webinars, blogs, people, etc).

I think all the material out there is focused on people who already have an edge and just need the confidence on executing it (post edge discovery). But at the moment i haven't found anything pre edge discovery.

So far the only thing i know is that i don't believe in technical indicators.

Thanks.
Rhuz

and @kickmic


Quoting 
ignoring indicators, just looking at other peoples journals who are kind enough to post where their entries and exits are on charts is a great place to start.


Hahahaha....my "edge" is that I do understand several indicators and their interactions. And yes, I exploit that knowledge as much as possible.

To me if you have to ask what your "edge" is you have not really developed a your trading strategy. It is not something that you can be taught. Why are some sports figures more successful than others? Why are some business men more successful than others? Why are some contractors/architects world class and others are mediocre?.... the list could go on....

I doubt very much that the most successful had to ask others how to be top of their craft. Book learning and seminar watching take you to a certain level but to gain an edge you must see something you are better than the normal....and you exploit it to your benefit.

You have not found that inspiration yet it seems....no one can direct you

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  #7 (permalink)
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There is no "edge".
A real edge comes from you knowing something that others don't, and how many can claim that?
Never think that anyone is smarter than the market.

If you develop a set of skills as a trader, you analyze your chosen market and notice
certain market behaviors that you act upon. This is your method.
Investigate how to execute your method relentlessly. execution is king(!) and sadly very under-appreciated.

You learn to deal with the ups and downs of your strategy once you test it.
Expect drawdowns, big ones, sometimes huge ones. Nothing is linear.

At some point go live and don't become a perpertual social butterfly paper-trader. When you will trade live you will get appreciation for liquidity, commission effect on strategy, your moods in lieu of real money traded and length of time for each trade. This will all lead to better implementation of your strategy.

Lastly, don't say you don't believe in something just because there is a consensus. People trade different time frames where different tools help in a variety if ways.
I hope this helps.

Matt

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  #8 (permalink)
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mattz View Post
There is no "edge".
.

i don't think of edge like this at all.
a set of circumstances, scenarios, patterns, call it what you will align prompting the trader to make a trade.
the trader who really is exercising his/her edge accepts the outcome of the trade as uncertain. However, the trade is made on the basis of having made the same trade (including the risk management and profit management strategy) hundreds of times before, and that over a large sample base produces a positive outcome.

the edge ceases to exist when the outcome over a large sample base no longer produces a positive outcome, hence the need for continued review of groups of trades.

I interpret the original post as learning an approach to the market that when repeated over a large sample base produces a positive outcome.

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  #9 (permalink)
Legendary Market Wizard
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Edge simply means:

Know Thy Market!

This is the best way to describe the moment where you can guide your vehicule without the help of others.
To find this edge needs quite some "training". And time.
But to find a system that fits your personality - this is quite another chapter:
Define for yourself how much time you can and will invest for a trade. Now and in the future.
Then you define which daytime is best for you personally when you regularly want enter / exit your market.
Inspect carefully then what happens in that time within the market - movements, directions, volumes etc.
By then you are not far to make the right decisions to press some points out for yourself.
And you may put your own system to do right this.

Good Findings!
GFIs1

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My mistake for using the word edge (i already edited it), i think that caused a lot of confusion.

What i as trying to say is that i need help developing my methodology(and no, i'm not asking for yours). Have a clue on things like, what to look for in my personality so i could consider a trend system or a mean reversion for example or if i'm a patient person maybe scalping is not for me. I was looking for things more like this.


Quoting 
But to find a system that fits your personality - this is quite another chapter:
Define for yourself how much time you can and will invest for a trade. Now and in the future.
Then you define which daytime is best for you personally when you regularly want enter / exit your market.
Inspect carefully then what happens in that time within the market - movements, directions, volumes etc.
By then you are not far to make the right decisions to press some points out for yourself.
And you may put your own system to do right this.

Not like this.


Quoting 
Hahahaha....my "edge" is that I do understand several indicators and their interactions.
To me if you have to ask what your "edge" is you have not really developed a your trading strategy.

That's just what i was saying.


Quoting 
There is no "edge".
A real edge comes from you knowing something that others don't, and how many can claim that?
Lastly, don't say you don't believe in something just because there is a consensus. People trade different time frames where different tools help in a variety if ways.

I think the edge exist but is not what everybody thinks, if i don't have an edge i simply can't make money. The edge could be in my mind, in my ability to read the market or anywhere else but i have to be comfortable with it. And in terms of knowing something that others don't the only think i believe i have to know and others don't know is myself/themselves. That's how i will develop and strategy that i will feel comfortable trading.

For the indicators part for @Underexposed indicators are what you use and that's your bias or way of thinking so that's what works for you. For @mattz i don't say that about indicators just because others say so. I say it because indicators based on price are lagging and at the end is just another way of looking at price, that's my bias or way of thinking and i don't think that indicators are what drives price up, down or sideways. People use them, it's fine that's what works for them.

Thanks all for your comments.
Rhuz

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