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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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  #41 (permalink)
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I don't want to address some of the personal conflict that emerged on this thread... perhaps only to say: keep that stuff out please. If you disagree with someone, disagree, without denigrating the person (and if you cannot help yourself, you have some deeper inner work to do).

Now, I want to say that people have misunderstood the topic of this thread. It is not about actual edges (i.e. concrete specific trading strategies). It is the about the source of edges, not the actual edges themselves. Those are two different things. And no, I am not hair splitting. This is an important distinction.

This strategy or that strategy, personally, I don't care. I have seen them all... and then some, over the last 15 years of trading. What interests me much more is the SOURCE of edges, of success. Because that is what is dynamic, what lasts.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #42 (permalink)
Vista, California USA
 
 
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In that case the source of my edge is what I have learned from or realized because of Jesse Livermore, Richard Dennis, and Ed Seykota.

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  #43 (permalink)
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So everybody knows, I was not affended in any way by the comments. He is passionate and believes in his side...I get it. We were challenging each other on our views and I enjoy that. No hard feelings here.

So back to you and your interpretation of source. Indicators, price action, good backtesting methods, etc. cant be a SOURCE of edge? Can it only be a physiological mood, view or some feeling you get. Although both are nice, I would argue the first is more important and can possible take the second out of the equation. JMHO.
Anagami View Post
I don't want to address some of the personal conflict that emerged on this thread... perhaps only to say: keep that stuff out please. If you disagree with someone, disagree, without denigrating the person (and if you cannot help yourself, you have some deeper inner work to do).

Now, I want to say that people have misunderstood the topic of this thread. It is not about actual edges (i.e. concrete specific trading strategies). It is the about the source of edges, not the actual edges themselves. Those are two different things. And no, I am not hair splitting. This is an important distinction.

This strategy or that strategy, personally, I don't care. I have seen them all... and then some, over the last 15 years of trading. What interests me much more is the SOURCE of edges, of success. Because that is what is dynamic, what lasts.

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  #44 (permalink)
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WoodyFox View Post
So everybody knows, I was not affended in any way by the comments. He is passionate and believes in his side...I get it. We were challenging each other on our views and I enjoy that. No hard feelings here.

So back to you and your interpretation of source. Indicators, price action, good backtesting methods, etc. cant be a SOURCE of edge? Can it only be a physiological mood, view or some feeling you get. Although both are nice, I would argue the first is more important and can possible take the second out of the equation. JMHO.

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Good questions.

Sure they can. My question: in what way are they? And what I mean by that is not how to tweak them specifically. I mean in general terms. For instance, in a market where EVERYBODY sees the price action, WHAT is the source of advantage / success / profit?

I am a discretionary trader. I look at a 5 minute chart. This is visible to everyone else. So if I trade profitably in a long run, what is the difference in my information processing from other traders? I know the answer for myself. But I am curious how other (profitable) traders can answer that question for themselves.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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  #45 (permalink)
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lightsun47 View Post
Extreme hard work and insurmountable patience.

Only those two helped me find my true edge.

I agree with your points too, but they can only be found after these two. Otherwise, forget about it. You're battling against robots everyday which are designed to take your money instead of giving it to you. So have patience and work hard.

BATMAN: There is always a way - you just have to find it.

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I will still put this again AS MY SOURCE for finding my edge: Hard work and patience.

I personally know someone who makes income of CEOs and when asked for help, he said: do you do your hard work in finding your edge and are you having a lot of patience?

Turns it took me 2 years to find my edge based on his advice, but this is base of it. MY SOURCE.

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  #46 (permalink)
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Anagami View Post
Good questions.

Sure they can. My question: in what way are they? And what I mean by that is not how to tweak them specifically. I mean in general terms. For instance, in a market where EVERYBODY sees the price action, WHAT is the source of advantage / success / profit?

I am a discretionary trader. I look at a 5 minute chart. This is visible to everyone else. So if I trade profitably in a long run, what is the difference in my information processing from other traders? I know the answer for myself. But I am curious how other (profitable) traders can answer that question for themselves.

Showing how I tweak would give up my edge. So I will refrain.

I no longer use discretion, and only see the price data through a mathematical lens. Like I said in my first post....As a mechanical trader, it comes down to Consistency and Perseverance.

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  #47 (permalink)
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Anagami View Post
Good questions.

Sure they can. My question: in what way are they? And what I mean by that is not how to tweak them specifically. I mean in general terms. For instance, in a market where EVERYBODY sees the price action, WHAT is the source of advantage / success / profit?

I am a discretionary trader. I look at a 5 minute chart. This is visible to everyone else. So if I trade profitably in a long run, what is the difference in my information processing from other traders? I know the answer for myself. But I am curious how other (profitable) traders can answer that question for themselves.

I am a systematic trader, and I think the "source of my edge" comes from these two categories:

- structural inefficiencies
- human being’s behavioral biases.

Examples of structural inefficiencies:
- the perpetual decline (over a large time scale) of the volatility ETN like VXX. It is designed to drop to zero, though the road to zero is extremely rough.
- the margin calls that usually cause large price movement near the end of a big down day
- the "footprint" of large traders. They tend to do things in certain ways.

Examples of behaviroal biases:
- The Fear of Missing Out (FOMO) behavior that causes blowoff tops.
- The fear implanted in short seller’s mind (in line with “limited gain, unlimited loss”) that causes short-squeezes.
- The threshold of pain from staying in a losing position that causes traders to “puke”.

@Anagami, I am curious of what difference is in the way you process information--always like to learn something new.

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  #48 (permalink)
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edgefirst View Post

- the "footprint" of large traders. They tend to do things in certain ways.

So true... I have developed some profitable strategies just using institutional orders/volume. I often wonder how many traders actually use this valuable info? I'm guessing not many.

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  #49 (permalink)
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edgefirst View Post
I am a systematic trader, and I think the "source of my edge" comes from these two categories:

- structural inefficiencies
- human being’s behavioral biases.

Examples of structural inefficiencies:
- the perpetual decline (over a large time scale) of the volatility ETN like VXX. It is designed to drop to zero, though the road to zero is extremely rough.
- the margin calls that usually cause large price movement near the end of a big down day
- the "footprint" of large traders. They tend to do things in certain ways.

Examples of behaviroal biases:
- The Fear of Missing Out (FOMO) behavior that causes blowoff tops.
- The fear implanted in short seller’s mind (in line with “limited gain, unlimited loss”) that causes short-squeezes.
- The threshold of pain from staying in a losing position that causes traders to “puke”.

@Anagami, I am curious of what difference is in the way you process information--always like to learn something new.


The stock market is neither efficient nor random. It is not efficient because there are too many poorly conceived opinions. It is not random because strong investor emotions can create trends. - William O'Neil

That quote was from the 80's before as much program trading but they have only made it less efficient and less random. "robots" and increased % of retail traders have made it easier for me. By easy I mean longer and more identifiable trends. I am not battling them I am following them and they are more linear than big traders trying to hide their footprints. It will be amazing with different market condition than the last 10yrs.

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  #50 (permalink)
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edgefirst View Post
@Anagami, I am curious of what difference is in the way you process information--always like to learn something new.

Great question. Watching the same market for a long time creates perceptual filters in one's mind that allow not just for directional handicapping, but more accurate assessment of the likely magnitude of a move...etc. In other words, experience counts for a lot, specifically in terms of grasping the present market context. That's why this game is not about having 'the right strategy'. It is about recognizing the right context for the strategy that you do have. Many people have this completely backwards.

So, how to recognize the context in any given moment? I couldn't code it into an algorithm, and thank God for that, because then it could be exploited.

80% of volume is algos. Algos look at some things being in place, and then they fire. I don't trade or think like that. I can see 20-30 trade setups a day on ES, but never take more than 1 or 2 of the best. What is the 'best'? That's exactly the source of my edge, the ability to 'understand' the market context that shifts the probability of my trade success from lower to higher.

"The mind is its own place, and in itself can make a heaven of hell, a hell of heaven." - Milton
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