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What Is the Source of Your Edge??


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What Is the Source of Your Edge??

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  #11 (permalink)
Orlando, Florida
 
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As a discretionary trader, I never truly found an edge.

As a mechanical trader, it comes down to Consistency and Perseverance. There are many mechanical edges. But once I found my first, they became easier to find. After you find severalůmaybe then you can also add Picky.

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  #12 (permalink)
Legendary Market Wizard
Cancun, Mexico
 
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WoodyFox View Post
As a discretionary trader, I never truly found an edge.

As a mechanical trader, it comes down to Consistency and Perseverance. There are many mechanical edges. But once I found my first, they became easier to find. After you find severalůmaybe then you can also add Picky.

I used to think that edges appear and disappear in the market. Now I think, perhaps more accurately, that edges remain in the markets, but manifest only when the underlying conditions are just right. This may be splitting hairs to some, but this is an important distinction for me.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #13 (permalink)
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Anagami View Post
I used to think that edges appear and disappear in the market. Now I think, perhaps more accurately, that edges remain in the markets, but manifest only when the underlying conditions are just right. This may be splitting hairs to some, but this is an important distinction for me.

You should safely IGNORE those people here on the boards that discourage you and tell you that 'bots are constantly watching over to see which edges are working and they'll stop making them work in small amounts of time everyday / week'.

In my opinion, these are the same people who have actually achieved nothing and are constantly bashing negative comments / thoughts everywhere. Thus, people who are new to trading, actually get affected mentally - so much so - that they might run away permanently from this.

Edges REMAIN in the markets as long as you know which ones work permanently.

On the other hand, I found several edges which worked in June, but refused to work in July.

Therefore, find the permanent edges which work thoroughly and satisfactorily - although it might be a bit of an effort - but it is NEVER impossible.

If you have paid attention to my earlier post here, I put a quote from Batman. Now, I'll leave you with another thought you should always imbibe in your consciousness:

Impossible means you have not found the solution yet.

Good luck.

Sent using the futures.io mobile app

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  #14 (permalink)
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lightsun47 View Post
...safely IGNORE those people here on the boards that discourage you

LOL No worries, I am not aware of any people discouraging me, nor am I discouraged.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #15 (permalink)
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my edge is enough skill to identify the trend of the daily chart and then enough discipline to only trade in that direction using the hourly chart

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  #16 (permalink)
Orlando, Florida
 
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Anagami View Post
I used to think that edges appear and disappear in the market. Now I think, perhaps more accurately, that edges remain in the markets, but manifest only when the underlying conditions are just right. This may be splitting hairs to some, but this is an important distinction for me.

I agree on the ideal that strategies do not disappear... For me, they were just a weak or insufficient edge. When traders (including myself) first start trying to find edges, they make the mistake of over optimizing to the current conditions of the market in question.

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  #17 (permalink)
SpeculatorSeth
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lightsun47 View Post
You should safely IGNORE those people here on the boards that discourage you and tell you that 'bots are constantly watching over to see which edges are working and they'll stop making them work in small amounts of time everyday / week'.

In my opinion, these are the same people who have actually achieved nothing and are constantly bashing negative comments / thoughts everywhere. Thus, people who are new to trading, actually get affected mentally - so much so - that they might run away permanently from this.

Edges REMAIN in the markets as long as you know which ones work permanently.

On the other hand, I found several edges which worked in June, but refused to work in July.

Therefore, find the permanent edges which work thoroughly and satisfactorily - although it might be a bit of an effort - but it is NEVER impossible.

If you have paid attention to my earlier post here, I put a quote from Batman. Now, I'll leave you with another thought you should always imbibe in your consciousness:

Impossible means you have not found the solution yet.

Good luck.

Sent using the futures.io mobile app

Well that's me so I'll present the other side of this argument.

Edge by its very definition cannot be permanent. An edge means an advantage over other market participants. If everyone has that advantage, then it isn't an advantage.

Now some edges are more likely to last than others. There really are robots out there back testing every possible combination of indicators you can possibly come up with to arbitrage that edge out of the market. Doesn't mean that such edges can't exist. Just that very few people will actually find them, and if you do find one it will probably be very sophisticated. It is simply not a game that most humans will be competitive at.

I've had many good periods of success for 3-6 months at a time off individual technical edges. I've found a lot of interesting things that are certainly useful, but nothing that I found was able to bring success on its own. Does that make me bitter that I can't find a reliable technical edge? I guess you can look at it that way, but the point here is that I know my limitations. I am an experienced programmer that can write just about anything I can think of. I have lots of connections with other traders to find potential new avenues of investigation. These are real edges I have over the majority of retail traders. Despite this I cannot compete against a HFT firm with a whole team of similarly minded programmers and mass amounts of computing power to back it up. My edge in that area was only enough to get me to break even.

Can you compete in that area? There's lots of people that claim to. However, I have yet to find anyone here or elsewhere that could actually back it up with a sufficiently long period of performance and data.

Which is why I have eschewed relying on technical analysis for edge. My edge comes from watching news and better understanding how that news will affect the fundamentals and thus generate trade. While the vast majority of retail traders are watching for patterns, I read news. I seek to understand what is moving the market, and catch the move before it shows up in the chart. I try understand when the news will have impact, and I try understand when the news is fake. Instead of following other traders based on how they move price, I predict what will happen and let everyone else follow me. And if I don't understand what is going on then I stay out, because I have no edge in that action.

Now I wish I could say that I was a top expert on the markets. The reality though is that my own knowledge is quite limited, and I don't know what I don't know. However, the rest of the retail world is trading off hype and noise. That makes it a lot easier to develop an edge based off news and fundamentals. In the land of the blind, the one eye man is king. Focusing more on the macro fundamentals has done more for my trading than almost anything else.

THAT, in my opinion - is edge.

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  #18 (permalink)
Legendary Market Wizard
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TWDsje View Post
Well that's me so I'll present the other side of this argument.

Edge by its very definition cannot be permanent. An edge means an advantage over other market participants. If everyone has that advantage, then it isn't an advantage.

Now some edges are more likely to last than others. There really are robots out there back testing every possible combination of indicators you can possibly come up with to arbitrage that edge out of the market. Doesn't mean that such edges can't exist. Just that very few people will actually find them, and if you do find one it will probably be very sophisticated. It is simply not a game that most humans will be competitive at.

I've had many good periods of success for 3-6 months at a time off individual technical edges. I've found a lot of interesting things that are certainly useful, but nothing that I found was able to bring success on its own. Does that make me bitter that I can't find a reliable technical edge? I guess you can look at it that way, but the point here is that I know my limitations. I am an experienced programmer that can write just about anything I can think of. I have lots of connections with other traders to find potential new avenues of investigation. These are real edges I have over the majority of retail traders. Despite this I cannot compete against a HFT firm with a whole team of similarly minded programmers and mass amounts of computing power to back it up. My edge in that area was only enough to get me to break even.

Can you compete in that area? There's lots of people that claim to. However, I have yet to find anyone here or elsewhere that could actually back it up with a sufficiently long period of performance and data.

Which is why I have eschewed relying on technical analysis for edge. My edge comes from watching news and better understanding how that news will affect the fundamentals and thus generate trade. While the vast majority of retail traders are watching for patterns, I read news. I seek to understand what is moving the market, and catch the move before it shows up in the chart. I try understand when the news will have impact, and I try understand when the news is fake. Instead of following other traders based on how they move price, I predict what will happen and let everyone else follow me. And if I don't understand what is going on then I stay out, because I have no edge in that action.

Now I wish I could say that I was a top expert on the markets. The reality though is that my own knowledge is quite limited, and I don't know what I don't know. However, the rest of the retail world is trading off hype and noise. That makes it a lot easier to develop an edge based off news and fundamentals. In the land of the blind, the one eye man is king. Focusing more on the macro fundamentals has done more for my trading than almost anything else.

THAT, in my opinion - is edge.

Thanks for offering a completely different viewpoint.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #19 (permalink)
Orlando, Florida
 
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TWDsje View Post
Now some edges are more likely to last than others. There really are robots out there back testing every possible combination of indicators you can possibly come up with to arbitrage that edge out of the market. Doesn't mean that such edges can't exist. Just that very few people will actually find them, and if you do find one it will probably be very sophisticated. It is simply not a game that most humans will be competitive at.

Most all indicators are worthless and are nothing more than lagging history. You are more than likely curve fitting your data by not looking at enough historical history. This is why your edges only last for short periods of time and then you find yourself looking for another edge elsewhere. There are edges using stock/public available indicators if you use a large enough amount of historical data. The downfall is...Your equity curve draw downs will be ugly. You can somewhat combat this with diversifying instruments, but for me its still not worth the effort. The best edges take work and are not going to be obvious. Try finding an edge using just price or Volume (without lagging it by an indicator). If and once you do, combine them. Also,Try using implied volatility to gauge price moves. Many edges there.

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  #20 (permalink)
Capt. Johnny Jameson
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WoodyFox View Post
Most all indicators are worthless and are nothing more than lagging history. You are more than likely curve fitting your data by not looking at enough historical history. This is why your edges only last for short periods of time and then you find yourself looking for another edge elsewhere. There are edges using stock/public available indicators if you use a large enough amount of historical data. The downfall is...Your equity curve draw downs will be ugly. You can somewhat combat this with diversifying instruments, but for me its still not worth the effort. The best edges take work and are not going to be obvious. Try finding an edge using just price or Volume (without lagging it by an indicator). If and once you do, combine them. Also,Try using implied volatility to gauge price moves. Many edges there.

My biggest edge is patience...and the ability to read the markets. I used to put most of my efforts into technical analysis...not so much anymore.

Johnny

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