A recent trading blog (forget which) asked a thought provoking question, what can you identify as your edge that doesn't depend on your past performance? Traditionally traders primarily extrapolate past performance as an indicator of their future success. However, we know from financial literature that past performance has severe limits in projecting success.
Here are a few things I can think of that could be justified as edge that doesn't depend on historical performance..
* Low trading cost. Choosing a commission free broker gives you a vertical edge over other traders who haven't migrated yet to such solutions. Likewise, trading less frequently will also reduce your trading cost.
* Risk. It is known that taking greater risk is associated with greater return. Trading a system with a larger stop loss, all things considered, should yield a greater return.
* Diversification. More baskets, more eggs.
* Capital. Some claim it is not an edge. I differ. It is important to get to the essence of what makes for success in trading. One thing we know: if you have capital you can trade. If you don't have capital, it does not matter how great you are: you can't trade. More capital means you can lose for longer too.
* Cognition. Markets are forward looking. If you can identify the factors driving the market and speculate on how they change in the the future then you are more likely to have a valid model of market behavior which should translate to longer term profits.
* A disciplined approach to risk. While taking higher risk per trade should correlate with a stronger robustness, at the same time, taking less account risk should lend itself to a higher probability of making a profit.