Permanent edge

Is there such a thing?

I thought I had one and up till a couple of weeks ago, it had been solid for a year and a half. Not actually checked prior as yet but it was a simple recurring price action that gave consistent returns with minimal risk and high strike rate.

I had concentrated on primarily a single market but it also works on others too as checks are made (spot FX at least)....

Whilst it still continues to work on some, the original market of choice has dramatically changed over the last few weeks to the point I hardly recognise it, yet still it works on others.

This could be down to a number of things and it could just be a mute period for the original market and swings and roundabouts are inevitable.

Anyhow, not that I wish this to be about me but rather;

Do you think it is possible to have a permanent edge, ie a set-up based on previous occurances of similar action that will consistently repeat itself forever or do the markets and the traders change too much for it to be possible?

wasp said:

Is there such a thing?

I thought I had one and up till a couple of weeks ago, it had been solid for a year and a half. Not actually checked prior as yet but it was a simple recurring price action that gave consistent returns with minimal risk and high strike rate.

I had concentrated on primarily a single market but it also works on others too as checks are made (spot FX at least)....

Whilst it still continues to work on some, the original market of choice has dramatically changed over the last few weeks to the point I hardly recognise it, yet still it works on others.

This could be down to a number of things and it could just be a mute period for the original market and swings and roundabouts are inevitable.

Anyhow, not that I wish this to be about me but rather;

Do you think it is possible to have a permanent edge, ie a set-up based on previous occurances of similar action that will consistently repeat itself forever or do the markets and the traders change too much for it to be possible?

Click to expand...

re: permanent edge: become a broker and get paid commissions irrespective if your client wins or loses, just be sure to encourage them to trade often, and collect fees.

the question you ask is unanswerable really because most edges are derived from observing past behaviour, and assumed to continue into the future.

to turn the analogy around, have you ever met someone who came up with an edge that couldnt be shown to exist in the past, but the person believed would start to work in the future?

EDIT: I replied within 10 mins of you posting. I have way too much time on my hands, and should get out more.

wasp said:

Is there such a thing?

I thought I had one and up till a couple of weeks ago, it had been solid for a year and a half. Not actually checked prior as yet but it was a simple recurring price action that gave consistent returns with minimal risk and high strike rate.

I had concentrated on primarily a single market but it also works on others too as checks are made (spot FX at least)....

Whilst it still continues to work on some, the original market of choice has dramatically changed over the last few weeks to the point I hardly recognise it, yet still it works on others.

This could be down to a number of things and it could just be a mute period for the original market and swings and roundabouts are inevitable.

Anyhow, not that I wish this to be about me but rather;

Do you think it is possible to have a permanent edge, ie a set-up based on previous occurances of similar action that will consistently repeat itself forever or do the markets and the traders change too much for it to be possible?

Click to expand...

Hi Wasp

YES I think it is

Green grocers & Butchers were still in the high street last time I looked

wasp said:

Is there such a thing?
......
Do you think it is possible to have a permanent edge, ie a set-up based on previous occurances of similar action that will consistently repeat itself forever or do the markets and the traders change too much for it to be possible?

Click to expand...

Yes, i believe it would be possible, but only can we be certain of a truly permanent if we knew on which instrument the strat would definately work on at any given time.
As you indicate, it is very frustrating to see something stop working so well on one instrument, only to see it working on the other instrument that you are not trading. So then one might try it on the other instrument, only to see it stop working on that instrment & start working again on the other instrument etc.......

wasp said:

Is there such a thing?

I thought I had one and up till a couple of weeks ago, it had been solid for a year and a half. Not actually checked prior as yet but it was a simple recurring price action that gave consistent returns with minimal risk and high strike rate.

I had concentrated on primarily a single market but it also works on others too as checks are made (spot FX at least)....

Whilst it still continues to work on some, the original market of choice has dramatically changed over the last few weeks to the point I hardly recognise it, yet still it works on others.

This could be down to a number of things and it could just be a mute period for the original market and swings and roundabouts are inevitable.

Anyhow, not that I wish this to be about me but rather;

Do you think it is possible to have a permanent edge, ie a set-up based on previous occurances of similar action that will consistently repeat itself forever or do the markets and the traders change too much for it to be possible?

Click to expand...

Hi Wasp,

I know my reply probably sounds obvious but doesn't it depend on what you define as your "edge" ?

For example, identifying an inefficiency in the market which can be exploited for profit would definately been defined as having an "edge" but in this case I would suggest that over time this "edge" would probably diminish due to changing Market conditions or other influences.

In contrast, if your edge was the fact that you had discovered a new method for Position Sizing which offered a higher return than conventional methods, then I would suggest that this could be maintained over the long-term.

Just my 2 cents,

Chorlton

There is a permanent edge: skill. You want to make sure you made money because you have the skill. Having this skill means anticipating changes in the market and not getting caught doing the same thing that 'worked' in the past when things change. After all, why would there be a visible, unchanging edge sitting there to be exploited for years? If you are not ahead of your competetors, eventually you will lose to them. Incidentally, this is why I never advise people to risk 2% of their capital. When a trader finds something that works, he should press hard, win and quit while he is ahead.

Those with the skill to understand the makets are the only ones who will be around for a long time. Ask yourself if you are one of them.

Chorlton said:

Hi Wasp,

I know my reply probably sounds obvious but doesn't it depend on what you define as your "edge" ?

For example, identifying an inefficiency in the market which can be exploited for profit would definately been defined as having an "edge" but in this case I would suggest that over time this "edge" would probably diminish due to changing Market conditions or other influences.

In contrast, if your edge was the fact that you had discovered a new method for Position Sizing which offered a higher return than conventional methods, then I would suggest that this could be maintained over the long-term.

Just my 2 cents,

Chorlton

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There is no 'edge' in money management. If you don't know what you are doing and cannot find an edge in the market, you will lose regardless of MM.

FXSCALPER2 said:

There is no 'edge' in money management. If you don't know what you are doing and cannot find an edge in the market, you will lose regardless of MM.

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My example assumed that one already had a reliable strategy with a positive expectancy. Granted, if you don't have one of those, then you're wasting your time.

However, the point I was trying to convey is that IMO an "edge" can relate to almost anything if you believe that using it gives you an advantage over others.

wasp said:

Is there such a thing?

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Yes....And not to put too fine a point on it...

...the matter of having an edge and keeping it...is a singular prerogative and not a plural one...since the acquisition of an edge...( a major edge is permanent and a minor one temporary) is a matter of singular application and not a collective effort.

Its very nature of exclusivity and priviledge defines and qualifies it, enough said on that.

I forgot to add....

You cannot complain that I do not tell you everything.

Good question, and one close to my heart.
I found something that works and has been giving me at least 30 pips nearly everyday for the last year or so. However, about 6 months of that was just papertrading as I am cautious by nature.

I dont think ill ever find something like this again, and the fear of it just stopping working one day is always in the back of my mind.

However, I know traders who have used the same methods profitably for at least 5 years (some alot more)so either way, hopefully i still have a few years left...

wasp said:

Do you think it is possible to have a permanent edge, ie a set-up based on previous occurances of similar action that will consistently repeat itself forever or do the markets and the traders change too much for it to be possible?

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No because you can never backtest emotion on a Black Monday. Markets are changing all the time. Credit Changes, Programmed trading, overcrowded trades, etc... Diversification, Diversification, Diversification.

luckyd1976 said:

Markets are changing all the time.

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No they aren't, and I can prove it.

new_trader said:

No they aren't, and I can prove it.

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Depends from what point of view you're taking it.

Markets go through phases of low and high volatility. Markets go through sideways phases, parabolic rises, sharp drops. Each phase in the cycle has it's own specifics. Markets go through phases of expansion and contraction.

Not every market is the same, some markets are more prone to false break-outs than others. Some markets involve more professional money, others have a tendency to attract more retail traders.

Although the principles stay the same, I don't think the result always stays the same. When liquidity in a market drops below a certain threshold, the market will start to exhibit unusual patterns and become hard to trade. This is just one example. Subtle changes in the way the waves in a market move can however have a great affect on the edge of a trader.

I'm not saying I necessarily disagree with you - after all most of my trading is based upon principles laid out a long time ago - but I'm still interested in what you have to offer to proof your case.

Obviously there are edges that 'run out of time'. For example, suppose a market exhibits an remarkable tendency to reverse around noon. If, say for a month, this works 4 out of 5 days, you'll have yourself a nice edge. The next month the market stops doing this. Now I ask you, has the market changed?

firewalker99 said:

For example, suppose a market exhibits an remarkable tendency to reverse around noon. If, say for a month, this works 4 out of 5 days, you'll have yourself a nice edge. The next month the market stops doing this. Now I ask you, has the market changed?

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Would you say that noticing a market goes up and down is an edge? An edge is a skill you acquire which allows you to consistently make profits from a trading a market. If something about a market remains remarkable then you don't understand it and therefore it isn’t an edge.

new_trader said:

Would you say that noticing a market goes up and down is an edge?

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No, I would not. But that's beside the point, I've given a very simple example to illustrate my point. Pick any pattern from Bulkowski's, if you find it better than my hypothetical example.

So let's assume we have this "pattern" and the trader observes it. Each time it occurs he knows, with a high degree of probability, that price will move up, so he enters a trade long. He trades this pattern each time it presents itself on the chart. For 5 months the pattern presented itself 3 times a week, last month he couldn't find any. I ask again, has the market changed or is it going through it's normal cycle?

new_trader said:

An edge is a skill you acquire which allows you to consistently make profits from a trading a market. If something about a market remains remarkable then you don't understand it and therefore it isn’t an edge.

Click to expand...

So, an edge is not an approach, a method or a setup then, but a skill to read the market? And once one acquires this skill, it's permanent and he never needs to adjust his trading style/strategy/tactics?

Thought for the day...

For example, suppose a market exhibits an remarkable tendency to reverse around noon. If, say for a month, this works 4 out of 5 days, you'll have yourself a nice edge. The next month the market stops doing this. Now I ask you, has the market changed?

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No , maybe the trader just hasn't put his clock forward:idea:

Crap Buddist said:

No , maybe the trader just hasn't put his clock forward:idea:

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Ah, that explains it

firewalker99 said:

No, I would not. But that's beside the point, I've given a very simple example to illustrate my point. Pick any pattern from Bulkowski's, if you find it better than my hypothetical example.

So let's assume we have this "pattern" and the trader observes it. Each time it occurs he knows, with a high degree of probability, that price will move up, so he enters a trade long. He trades this pattern each time it presents itself on the chart. For 5 months the pattern presented itself 3 times a week, last month he couldn't find any. I ask again, has the market changed or is it going through it's normal cycle?



So, an edge is not an approach, a method or a setup then, but a skill to read the market? And once one acquires this skill, it's permanent and he never needs to adjust his trading style/strategy/tactics?

Click to expand...

Yes, an edge is a skill. It is the skill to move with the markets. A pattern is not an edge. This is why when one recognises a repeating pattern one should make as much money as possible and as quickly as possible and quit. If one is relying on patterns and such to make money in the long term, one is deluding oneself and will give it all back.

FXSCALPER2 said:

Yes, an edge is a skill. It is the skill to move with the markets. A pattern is not an edge. This is why when one recognises a repeating pattern one should make as much money as possible and as quickly as possible and quit. If one is relying on patterns and such to make money in the long term, one is deluding oneself and will give it all back.

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Not if one understands what creates the pattern in the first place, i.e. trader behaviour.
Fwiw, myself, I don't trade "patterns "in the classical sense of the word. But, for example, W-bottoms and head & shoulder formations have been there in the beginning, and they still are around nowadays. There's no reason to assume that the psychology that makes up the pattern has changed over the course of time.

You didn't answer my second question though: And once one acquires this skill, it's permanent and he never needs to adjust his trading style/strategy/tactics?