What's your 'edge'?

I’ve recently been re-reading ‘The New Market Wizards’ by Jack D. Schwager.

Having first read it a couple of years ago when my understanding and success in the markets was limited to say the least, I find that now I have reached a greater level of understanding and success I find I am getting much more from the book. Previously I may have subconsciously rushed through the book looking for the greats secrets, but now it’s a much more slower, more pleasurable read. However I will throw this question into the lions den and see if anyone is brave enough to answer (for the benefit of all of course).

In his Market Wiz(ar)dom section at the back he talks about how it’s absolutely necessary to have an edge (as do all successful traders) ......

.....“You can’t win without an edge, even with the world’s greatest discipline and money management skills. If you could, then it would be possible to win at roulette (over the long run) using perfect discipline and risk control. Of course, that is an impossible task because the laws of probability. If you don’t have an edge, all that money management and discipline will do for you is to guarantee that you will bleed to death. Incidentally, if you don’t know what your edge is, you don’t have one.”

First find you method, then find your edge.
So, do you consider yourself to have an edge or are you desperately searching and curious to know what an edge looks and feels like?
What’s your interpretation of having an edge?

Simple : Knowing your system / method can beat the market and has beaten it .

I have done and have the proof of 6:1 return on caiptal on SB's , despite all the handicaps associated with this type of trading.

That is my edge.

Most people if you've been trading for a few months , if you can't get large returns ( over 100% in that time ) assuming your capital is not too big , then really on your own you are never going to get the ' edge' .

from that point on most will either lose their money or piddle around with small sizes and overall BE type of returns - kidding thenselves that they are trading whereas they are just playing a video game.

A person who has the edge ( the real / proven one, not the usual charlatans who pop up here and there ) can guve you enourmous input .

Stockjunkie said:

Most people if you've been trading for a few months , if you can't get large returns ( over 100% in that time ) assuming your capital is not too big , then really on your own you are never going to get the ' edge' .

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Not always true. To say you have to make 100% returns within a few months or you have no chance of obtaining an edge is over the top.

Most people spend 6 months just leaning and understanding their market of choice. There are people on these boards come and gone who have lost ALOT of money in their intial months to go on and become more than proficient. I know, I am one of them!

see also...

http://www.trade2win.com/boards/showthread.php?t=14317

"What's your 'edge'? "
.... Leylandii

jezza888 said:

Not always true. To say you have to make 100% returns within a few months or you have no chance of obtaining an edge is over the top.

Most people spend 6 months just leaning and understanding their market of choice. There are people on these boards come and gone who have lost ALOT of money in their intial months to go on and become more than proficient. I know, I am one of them!

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Losing a lot of money in your first few months tells me you are not ready , and should not be in the market . Classic case of leaping before you look.

Stockjunkie said:

Losing a lot of money in your first few months tells me you are not ready , and should not be in the market . Classic case of leaping before you look.

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I may have jumped into quickly but I'm now more than ready, and now making more than enough in returns and have recouped all I lost and plenty more. I wouldn't be as proficient as I now am, had I not had those first few months to teach me some harsh truths about the markets.

I'll have to agree with Stockjunkie here. The notion that one must lose a lot of money when learning in order to get anything out of it is really no different than saying one must wreck quite a few cars before learning how to drive.

--Db

Your "edge" can probably be broken down to be definable by its results:

Profit factor = (total gross profit after costs / total gross loss inc costs) - example: gross profit of £15,000 / gross overall losses of £7000 = profit factor of 2.1 meaning that for every £1 you risk, you can overall expect to gain £2.10

Your actual edge will be the overall result of your crystallized and repeatable trading rules that mean you consistently win more than you lose.

dbphoenix said:

I'll have to agree with Stockjunkie here. The notion that one must lose a lot of money when learning in order to get anything out of it is really no different than saying one must wreck quite a few cars before learning how to drive.

--Db

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I'm not saying its neccesary to lose alot of money beforehand, its not. I did, but thats me. It taught me alot but my point is you don't have to win x 100% within the first few months in order to have a future in trading.

jezza888 said:

see also...

http://www.trade2win.com/boards/showthread.php?t=14317

Click to expand...

Thanks Jezza....I did do a search before starting this thread but somehow missed this interesting related thread.

Stockjunkie said:

I have done and have the proof of 6:1 return on caiptal on SB's , despite all the handicaps associated with this type of trading.

That is my edge.

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Based on your logic, someone making a 14,000,000 : 1 return on their lottery ticket has an edge.

Spam Man said:

Based on your logic, someone making a 14,000,000 : 1 return on their lottery ticket has an edge.

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That doesn't stand to reason at all .

He may hvae an edge for that moment that the numbers are anounced , but he can't reproduced that everyday over 2.5 years as I have .

Ah thats the nub of it.

Mathematically statistical significance comes into play. You need at least 30 events to have any significance. So winning the lottery once every 30 attempts would be significant, not 1 in 14 million...

JonnyT

Stockjunkie said:

He may hvae an edge for that moment that the numbers are anounced

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Nope - the point is that he doesn't have an edge at all, he just got lucky.

You may have got lucky too, even for the length of time you claim. It happens. Statistical outliers and all that. Making a profit isn't the same thing as having an edge. - if you think it is, then you don't know what your edge is.....

Making a profit isn't the same thing as having an edge.....

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True, and before we generate 40 or 50 or 200 posts arguing about unsupported claims of returns, maybe we could get back to the original post.

Just a suggestion . . .

--Db

Your edge begins with intentional boundaries. Similar to building your own chess board.
You end up with an over all board with extreme edges (boundaries), and a series of smaller boards within the whole, all demarcated with intentional boundaries.

Many traders call this a trading plan.

Each smaller board (the squares your game pieces sit in) represents time,direction, quantity, and action as boundary's.

Your game pieces are your strategies that are restricted by the boundary's you put in place.

Your edge matures as you gain experience intentionally testing those boundary's, and eliminating unintentional testing of those boundary's.

At this point you gain an advantage

Spam Man said:

Nope - the point is that he doesn't have an edge at all, he just got lucky.

You may have got lucky too, even for the length of time you claim. It happens. Statistical outliers and all that. Making a profit isn't the same thing as having an edge. - if you think it is, then you don't know what your edge is.....

Click to expand...

Lucky ? I acheived a 6X RETURN on capital through lousy SBs over thousands of trades is luck ?

Well I tell you what , I don't care what label you call it , whatever it is I would much rather have that than some academic definition of an " edge " .

If anyone thinks they they can do it , then DO IT and prove it . The conditions are all on my site , if you are serious .

Stockjunkie......give it a rest....all your posts go on about making 6x return on capital.....blah , blah bloody blah.
There are loads of us on this site who have caned the likes of cmc in the distant past but the reality is the real money is in direct access not messing about spreadbetting.
I presume since you are going on about your site, you are trying to sell some kind of advice?No doubt you'll find some mugs.

Seeing that db wants to get back to the original question (instead of whether sj is a secret spammer or just missed the bit where most market wizards were not making 100% in 6 months --- or if they did took a bit of a fall some time later) ===

An interpretation of an edge is a tested and (for you) tradable trading plan that has:
- clear entry, stop and exit rules
- risk management rules to achieve your psych/money/living goals
- monitoring to make sure your edge is still statistically valid and warn of degradation.