The Edge Trading System

[billworld]

Good ideas all around Dave and ZDO. Thanks.

Looks like the issue boils down to which approach is worthy of spending time on. I see the following options.

1. Spend many hours manually backtesting and manually forward testing (7 hours a day) the strategy to see if I can trade it effectively and profitably.

2. Spend many hours coding the system from scratch (and/or assembling bits and pieces from others' efforts) and let it run backtests and forward tests while I do something else. Then, spend hours analyzing the results and optimizing as appropriate (e.g. without curve-fitting).

If my end-goal is to only focus on a system which can be mechanised (e.g. clear cut rules which are not subject to interpretation), then it would seem that time spent on option #2 would be more worthwhile. Of course, a leap of faith or "hunch" is required with either option.

Yep, either way a whole bunch of time gets spent. Of course, the way to streamline the investment in time is to get educated as quickly as possible on what works or doesn't work based on the informed experiences of others or repute.

Okay, enough on process...

Does OmniTrader do a good job with its divergence indentification and can one adjust the indicator parameters to conform with the strategies herein (I imagine so, although I've heard from sources which indicate OT's optimization has a bit to be desired although I have no direct experience with this.)

Thanks again for your insight.

Regards,

Bill

Dammit!
Just typed 32 chapters and it went Kppphhht on me....

Okay, as ZDO says some platforms have this divergence stuff built in - Omnitrader for example. eSignal could be coded to do it, mainly by a masochist I'd suggest, but it's doable. First put the horse before the cart though - a significant programming effort will carry some baggage with it - it's hard to write your code, get it working properly, and then find you might as well be flipping coins. Write 'the edge' etc over a period of time and you'll be convinced it works, even while you keep losing money... you'll blame anything but the basic logic to the system, and that will be the EXACT spot it's going wrong.

Try your chosen system out on chart printouts, allow a sizeable slippage after entry/exit - allow for being able to react to a signal 1 or 2 bars later than they end up appearing, many systems take 1 or 2 bars to actually show the signal you were supposed to pounce on, and you need to add the spread to that. (These two factors alone will turn many 'winners' into losers). Once you KNOW you have an ace idea, THEN program it.

Dave

 

[DaveJB]

As far as I recall, not having run it for a couple of years (which doesn't apparently get me off the mailing list <g>) OT let's you play a bit - I bought it from Paritech here in the Uk and got a 60 day trial ... sent it back after 30 days and only paid postage etc, so it's a fairly cheap option I'd suggest - sunno where 'sam' might be, but Paritech have been okay with me over the years, even though I don't buy much off 'em.

If you are okay at writing code that is easily reconfigured when system 1 doesn't work and you fancy trying system 2, then coding is okay - I code faster than I mumble in my sleep, and I'd still avoid coding in the first instance before trying at least a minimum of manual testing... you can go back over the last 4-5 days charts in an hour checking a system out, whilst it'll take you rthat long to decide your first batch of global variables <g>

 

[ZDO]

Option 3

billworld,

re:

... I see the following options.

1. Spend many hours manually backtesting and manually forward testing (7 hours a day) the strategy to see if I can trade it effectively and profitably.

2. Spend many hours coding the system from scratch (and/or assembling bits and pieces from others' efforts) and let it run backtests and forward tests while I do something else. Then, spend hours analyzing the results and optimizing as appropriate (e.g. without curve-fitting).

Why not try an option number 3? That option would be to forward test your concept with real money. Commit to applying it across the board – no exceptions, no mistakes – for a suitable sample sized number of trades and commit to concurrently study for all those 'hours' how biases are operating in your concepts and in this style of trading.

Here’s my thinking behind such a crazy suggestion
At the end of all three of these options, you’ll know if you had fun – ie if it is for you.
With 3, you’ll learn as much about the market as you would with 1 and 2 – but
with 3, you’ll learn far more about yourself than with 1 or 2.
Also, clearing biases and such even has spiritual etc dimensions – since it’s really not only ALL about the money in the long run.

A chart is an objective representation (correct or incorrect) of a market. It is not the market. That is, it is objective - until we look at it. When we look, biases fill it in for us and the already incomplete representation of the auction really ‘falsens up’. The charts are ‘lying’ to begin with because the same patterns can show up for many different underlying auction processes. Indicators ‘lie’ even more because the same indicator patterns can exhibit for a multitude of chart patterns.

Watching chart bars go by is a lot like trying to judge commerce by watching traffic go under a bridge over a freeway. The patterns made by cars and trucks look the same without revealing much about what the trucks are loaded with (could be empty, could have a few boxes, could be full of valuable goods, even could be carrying small adam freakin bom - ). Indicators are calculated representations of representations and also tell very little about the auction ‘hidden inside' the vehicles. Measures like volume are most of the time used to obscure. (Fortunately for us, the times when volume is needed most for obfuscation, are the times when it can hide the least (– like the open bedded truck trailers) - but this requires developing skill, few are naturally completely talented at it, everything worth while requires going uphill, yada yada)

Let’s get back to ‘Edge’ type systems. In the end with divergence, ob/os etc systems, a trader is basically saying “I am the guy who steps in front of trends and stops them. I am the guy who steps in and starts new trends. Often singlehandedly … and I can do it using charts and indicators” Isn’t that arrogant? Yes, but not necessarily. Do it ALL for market types and you’ll get crumbled and humbled. Persist in clearing those biases in real time trading and suddenly or gradually it will become clear what type of swings ‘end’ pretty much on time and on price and give you good odds using ob/os indicators. When you know what techniques to use when, the entry techniques themselves can be, should be, very simple. Persist in clearing those biases until it becomes so conscious that the first thing you’re aware of when looking at a chart is your own biases… This is most effectively mastered using option 3. It is less effectively accomplished by debugging code or tweaking parameters or interpreting backtesting performance stats….

btw, I am started a new thread called ‘systems for sale’ The original post on this new thread was deleted from the first page of this thread by moderators. I don’t know why. Hopefully it was deleted because it did unfairly single out “The Edge” system (and it’s vendors) by ‘landing’(however unintentionally and ‘randomly’) in the “The Edge” thread. Maybe it will be spared in its own thread. If not, it’s still a few minutes of fun for a few members.

All the best,

zdo

 

[DaveJB]

Okay.
I've bought the system, run it for a while, and experienced some problems, I said I'd report back and this is it.

Bette has recently produced an update to the manual to explain some problem areas, notably the double tops and bottoms I've previously mentioned I was unhappy with.

The new manual contains numerous new chart examples, which show beyond any doubt that the lady is totally misusing the tems double top and bottom, on p30 for example for her second top all four preceding bars have higher highs, higher closes, and higher lows - I can't think of a worse candidate for a 'top'... it's now become clear to me why I struggled to understand a number of edge trades. In support of the manual I have to say that anyone who actually has a clue about TA will find her version of a double anything problematical, but (luckily) it's obvious what she is driving at so it doesn't actually matter very much. The new manual fills in the blanks a bit, dodgy areas in the previous manual aren't confusingt any more.... not that it's better explained, it's more a case of you suddenly see she's misusing some common TA terms which made trades difficult to follow.

I still DO find it a bit difficult to follow some examples, the new manual makes it plain that the close price is the one to look at whilst the older manual clearly shows examples where the high or low are used (almost as if she doesn't consider the prices to be different?) - but as long as you ignore her misuse of TA terms it becomes much simpler to apply. look for the indicator moves, check the close price of the bar they coincicide with, end of story.

I still outright reject the leeway on double top/bottom, any sensible and reasonably experienced chart reader should be able to say whether they are looking at a higher high, double top or lower high - granted the changeover point at which you decide the double becomes a higher high instead will be a matter of interpretation, but as this is a divergence system I cannot accept the idea that a second top 8 pts lower than the first is a double top on Dow 1 minute bars.... I've attached a small picture of the DJIA, A and B mark what I'd call a higher high, yet they are within 6 or 7 points of each other and I have some problems accepting that I can call this a lower top if necessary.

This system is now different to the one I received a few weeks back, in that 'old' system manual a number of highs and lows were used, not the close price, and this makes a significant difference....more of a difference occurs now that the indicator dips/peaks are compare to the bar immediately under them - the previous manual shows a number of examples where this is clearly not so, indicator peaks and dips are 'tied' to price moves that are several bars displaced.

I've chatted to a few people via PM on this, and I am impressed by the efforts some have gone to - my overall view after running it myself (within the limitations identified above, which means some of the official trades have had me wondering) is that it's every bit as good as most of the free stuff out there. If I ever want to lose serious money I'd trade it in a sideways market, doubling up a lot.

I cannot help, having looked at the new manual and compared it to the old one, getting a distinct impression from it - it seems to me that the method has been altered rather significantly for a start.... the indicator changes don't bother me, the changes to which price bars to look at, and what prices to compare have a bigger impact than perhaps immediately appears the case - consider this, if these indicators are indeed a leading indication of price move, then why is the bar immediately under the dip/peak used? Surely a leading indicator moves before the price, not coincident with it?

I am very unimpressed with the misuse of top and bottom definition, it's confusing to those who understand the terms and their common useage.Last time I looked a top occurred at the end of an upmove, it is not some arbitrary point 5 bars after the top jumps off the chart at you.

Dave
edited - I accidentally swapped 'top' and 'bottom' at one point

 

[ronfalcone]

Okay.
I've bought the system, run it for a while, and experienced some problems, I said I'd report back and this is it.

I am very unimpressed with the misuse of top and bottom definition, it's confusing to those who understand the terms and their common useage.Last time I looked a top occurred at the end of an upmove, it is not some arbitrary point 5 bars after the top jumps off the chart at you.

Dave>

Thanks Dave for your serious and sober review of this system. And for being generous enough to share the results.

I think the Edge developers are probably trying to be sincere but from all I've read so far, there appear to be real deficiencies that unfortunately, wouldn't be spotted by inexperienced or new traders. What troubles me is the idea of taking arbitrary license with the idea of a DT or DB---if that's indeed the case. I mean, you can stretch the concept of DT or DB by saying that's it's not the actual top or bottom, but the close. However, how do you justify calling a 6 point dip at the 2nd peak of a double top a DOUBLE TOP especiall when it occurs at the end of a downtrend?

Bad enough that TA is not really a regulated science and is, unfortunately, open to interpretation. Which makes arbitrary reconfiguring of it a problem as I see it.

By the way, I do know for a fact that the Edge people do monitor this site regularly, and so, I invite them in a spirit of openness and sincerity, to join in and answer the criticisms that have been made here. After all, if they really believe their system has merit, they should make their presence known and defend their claims of an 80% successfull system.

Betty, James, how about it?

Ron

 

[ronfalcone]

clarification

I mean, you can stretch the concept of DT or DB by saying that's it's not the actual top or bottom, but the close. >

what I meant was, you are stretching the definition of DT or DB by measuring the actual peak CLOSES as opposed to measuring the highs, or spikes that form the top.

Sorry

 

[DaveJB]

I too believe this is a sincere effort - not a scam. I have no doubt s personally on that... there'd have been no updated manual had this been a scam, for one thing, and far less website support etc. I just don't think it's been proof read very well.

There is a degree of frustration in my post, and it is caused by what I consider to be imprecision in the manual. In the matter of 'which bar do I compare to which, and which price on that bar' - the manual has been edited to allow the user to be more confident of the answer, although it still contains examples that contradict the instruction.

For example p25, the double bottom price - the first candle is the 4th or 5th after the indicator dip, not coincident as it's supposed to be. The second bottom appears to be a long green candle, although the red one prior to it is a much better equal bottom so I imagine it was meant to be that one....?

Double tops and bottoms are well explained in Murphy's TA of the financial markets and he tends to stick to the version I use. If this system is supposed to use closing prices to determine price trend, then it would make sense to draw the example charts using closing price charts rather than candle charts, it would also be a lot easier to both explain and use.

 

[fxmarkets]

hello dave, good luck with it mate, now when they the designers of the method talk about tops and bottoms do they give their reasons as to what they think can happen in these "zones" ,market action not indicators (although the indicators will change because of it) or do they say well notice how the peak gets here with this indicator then look. what happens........

 

[ronfalcone]

double bottoms redefined

I know this is basic, but here's a refresher on precisely what double bottoms are supposed to be (as per StockCharts.com who are, I believe, pretty big on Murphy's TA stuff):

http://stockcharts.com/education/ChartAnalysis/doubleBottom.html

Now if you look further down the above referred article, the issue of peaks or troughs----and how much variance is allowed between them to constitute the continued integrity of the double top/bottom pattern---is discussed. Stock Charts puts that variance at 3% difference. Thus, if a stock's first peak were $10.00 and the second peak, $10.50, that would be too wide a difference.

The problem of applying this logic to stock indexes is apparent. Obviously, the 3% rule would mean that DOW peaking at 11,000 could then go to 11,300 within which, the double top would still be valid---yet way too wide to use on an intraday basis.

However, I think things need not get this complicated. I think the real issue here is whether or not The Edge's claim of double top or bottom makes sense, and from the way Dave describes it, there's lots to be desired. As opposed to the clarity of examples presented on DAcharts of traders using divergence with NQ's, etc, in which *those* examples are as plain as day. Bottom line: system developers telling you to follow specific and well established patterns should provide well and established examples and not leave ambiguous and questionable interpretations to the end user; it certainly raises questions about the vendor's credibility and trur expertise.

 

[fxmarkets]

hmm yeah understand what you are saying ron re system developers saying SPECIFIC and that where indicators are too static over the ability of a person to read price and its probable to change here.

your 3 % rule again I see why thats said, maybe the manipulation of price to get orders flowing one way or another is kicking in , maybe just translate that into an ATR of your time frame and see if stop wise that helps, BUT if thats against the system rules, obviously not good to bugger about.

you'll end up rewriting it probably until you know it makes sense.

and here we come to the point about a person giving another person a method or one thats paid for, and if it doesn't fit, seem right, etc.. people will not be confident with it, guess it doubt it, hesitate, not take it etc.

it would be good discipline though, if you pushed through 50 trades, whether you like the signals or not and review, how you did.

 

[Splurge]

Well I did say I wouldn't waste my time with this thread any more from my last post which was some 15 pages ago!

However I am impressed at the amount of discussion this has generated to which direction I do not know. There appears to be about 14 pages of ranting and some very good pages of discussion. Dont take this as me appearing just to criticise but I am sure you will agree that to any person looking for the first time to review the merits/downfalls of this system, will be completely turned off by what some people have said without any knowledge of basic TA whatsoever. I must admit I got to page 8ish then gave up and just skipped through the nonsense.

I am surprised at the amount of in depth analysis of this approach and the results that people are getting. It seems to me that DaveJB has been the most objective and I found his work/posts very interesting. Socrates and others I am not sure where you stand guys as I couldn't follow where you was heading with your posts sometimes, please do not take offence with this comment

At the end of the day 16 pages later I do not know where this thread stands. There are those who like it and those who do not. I personally think this thread in its original form has practically run its course for those wanting to know whether its any good or not. I use it and I am happy with it. I would be lying if I said I haven't added further enhancements for myself as I am sure other people have, which leads me onto my purpose for this post.

There appears to be genuine users of this system that are frustrated by its performance or wish to discuss other ideas on top of it. I have received many messages privately about their success or failure and it seems that it may be good for these people as a group to get together. What does everyone think?

I hope no one takes this post as an act of war against what has been said by anyone or a reason to start ranting again. I am not linked to Edge in any way, I just use the system myself amongst other things and think that from the amount of Pm's that are flying around from satisfied and frustrated users that it may be a good idea for these people to discuss this more away from this thread.

Again no offense intended on the current situation with this thread just an enquiry on whether users are up for this idea. If you are send me a PM.

Splurge

 

[DaveJB]

Fx,
no - it's just 'this is what it looks like' - now I'm happy with that, it isn't supposed to be a TA course and the intention is obviously to produce a pretty automatic system, those who look into how indicators are constructed will be able to figure out how different moves will result in indicators peaking or dipping, and will understand why entering a trading range will cause false signals. I'm just not happy to see examples of a divergence system where the price is clearly going the same way as the indicator on occasion - it's simply illogical. Neither am I pleased to find I wasted so much time on it simply because the original manual talked about highs and lows on OHLCV charts when they were actually using close prices to determine these.

Put simply, I use the bar highs to find tops, and bar lows for bottoms. If you use the close price instead you will find tops and bottoms on different bars. This emphasis on close was not in the original text and chart examples in the manuals are still sometimes using the low and high... it DOES make a difference which you use!

I don't want to keep harping on this, it wasn't supposed to be a witch hunt and personally I think all that is needed is a v5 orf the manual that has been more carefully checked to ensure all example charts are in step with the signal description, and (personally) an amnedment that would reduce the signal count a bit by insisting the price and indicators are definitely diverging without messing about with what's an acceptable limit at a top/bottom . I would suggest that simply stating the limits on a top or bottom to be considered equal is probably not going to cut it - on a volatile day you'd allow more variation between prices than on a quiet day, what constitutes a double top or bottom will depend on how big a move the market makes in an average leg. It would appear to me that the easiest 'fix' for this is to use commonsense -either two tops are at the same price, or one is above the other... so if you need a lower or equal top for entry you don't enter if the second top is actually higher priced than the first one. Forget '' x" ticks difference being okay, it isn't - if your price chart is meant to be going downhill and it actually just went higher, no matter how marginally, then forget it.

Dave

 

[DaveJB]

Splurge,
I think that's an excellent idea. I'm failing to get across the fact that I don't think this is a ripoff system - just that it isn't particularly well described (in my view) and I'm far from convinced that the 'rules' are actually being followed by the designer - one reason why people fail to obtain the results a system designer manages is that the designer, knowing every little nuance, is applying a fair degree of discretion to signal selection that the rulebook simply doesn't cover. Replying to points raised in reply tend to make it too easy to start foaming at the mouth, coming over more critically in the process, which I'm tryingt to avoid. (Badly, perhaps).

Soc etc - a number of people able to trade very well using fairly straightforward price charts are of the opionion that to make money with systems is easy, you just have to keep selling them to gullible people for long enough. I have a lot of sympathy with this idea <g> You just have to accept that when a thread is generated on a subject you attract 3 groups to it - idle wanderers with time to kill who'd read a conrflakes packet if they had one handy, those interested in taking the idea forward, and those convinced it's a waste of time - and they simply cannot resist telling you so. Whilst this latter group can be very annoying, sometimes they're right.

Dave

 

[ronfalcone]

re:Splurge

Well I did say I wouldn't waste my time with this thread any more from my last post which was some 15 pages ago!

With all due respect, Splurge, then *why* are you wasting you're time now? no offence intended, but I wish you were here for the last two weeks telling us how much you liked the system! I believe that's what a number of us are here for in the first place - we want to 'hear' something positive as well as appreciate all the objective negatives that have been posted, and not just in private.

Frankly, I was ready to buy the system last week when The Edge people offered to sell it to me for the original Christmas discount ($100 off); but in lieu of largely negative criticisms which I believe are valid---especially from so experienced and serious end users like Dave whom I respect---kind of put a damper on things.

So Splurge, I completely agree with you. After 15 pages of posts, I'm still a bit on the fence!

 

[Splurge]

Ronfalcone the trouble is I did post my views on the system. Unfortunately that was on page 1/2 and seems to have been lost in the following 14 pages of ....well I dont know what to call it to be honest. I explained on my post then that I do not want to get involved in a war of words which 99% of the threads end up in. I decided at that point to stay away and let all those involved at the time lose themselves up their own backsides which by the looks of some of the posts they did with great effect.
A lot of the posts have been educational but after 16 pages anyone wanting to know more about the system will be completely brain-dead by everything that has been written. In fact I stayed away from this thread mainly answering emails people have been sending me direct on the subject. I only came back to see if the thread had died and nearly fell off my seat when I realised it was 16 pages long. To me this either meant that there are a lot of people who have the system but are struggling or there are a lot of people who want more info on it but cant get a straight answer.
As far as you sitting on the fence...Well I have explained my opinions of the system a number of times. I suggest you email Right Angle Trading direct, they may be able to put you in touch with other users if you want more.
I personally think there is merit for users to get together and expand this approach further whether by an email group or in a private chat room. If people want to continue the discussion on the system by use of this thread, that is of course up to them. I just dont think this is beneficial to anyone in its current form.

 

[ronfalcone]

re:Splurge

understood. Thanks for the clarification.

As for further tweaking and expanding, there is some excellent free stuff on divergence and e-minis which I found courtesy of DAcharts. See this link:

http://www.dacharts.com/systems.php

and then scroll down to "NQ Divergences." Seems like there's a lot of happy traders who use clear examples of divergence to positive effect.

IMO, I believe that additional price filters might better help to serve as benchmarks on intraday price action to determine whether, or not, a divergence will succeed, whatever the issue regarding divergence or non-divergence. For example, the use of well established pivots (as used by CBOE floor traders) might help to establish intraday price bias, thus effecting better trade accuracy. BTW, you can get complete formulae on pivots, for those interested, by simply going to the horses mouth - the CBOE homepage instead of paying for this info as offered by loads of vendors.

Ron

 

[ZDO]

DaveJB, et al,

re “and I'm far from convinced that the 'rules' are actually being followed by the designer - one reason why people fail to obtain the results a system designer manages is that the designer, knowing every little nuance, is applying a fair degree of discretion to signal selection that the rulebook simply doesn't cover.”

A more undesirable possibility is this generalization –
system designers DO NOT know every little nuance, cannot know every nuance
(Every nuance applied or not applied makes the system a totally new and distinct system btw)
and there is a HUGE degree of discretion to signal selection that the rulebook simply doesn't cover… pay up and go spend some days with one or two of these “master turn pickers” and you’ll see them applying rules and following impulses they don’t have a clue they are applying and therefore could not even begin to explain to you how they do it… let alone explain how you could replicate it.

Note: before I go on, the designer’s sincerity is not in question!
That said, I project this designer is almost ready to evolve a new revision that will have virtually NO mention of double tops and bottoms…
Will blindly change the system to meet the new now with added and deleted ‘nuances’
Seen this many times before with ‘divergence’ designers – Been there done that.
Guess what – there NOTHING wrong with the original system. What’s wrong is trying to apply it across the board when it only ‘clicks’ / ‘synchs up’ with the market occasionally. Users need to discover methods to know when (and when not) to apply it rather than trying to fix the system or get the designer to reword ie to do what amounts to redesigning the system (which is, in essense, in statistics, in performance, etc a request to create you a whole new system).

All these pages are not ‘wasted’. However they will help only a few – a few who are most likely already at a tipping point internally – to jump to a new way of looking at systems. All the rest will keep seeking and tweaking…

All the best,

ZDO

 

[ronfalcone]

ZDO - 'tweaking'

very good point. One system can NEVER fit all, and therefore, the designer is not in question (unless they make claims to the contrary and say that there's "is the last system" you will every buy which the Edge people have. I suppose, that's where some of the controversy lies).

Some may argue that trading system rules are not completely objective and there is ample room for interpretation on the part of a trader's 'internal' thought process. But therein may lie a significant problem. For in this very unregulated traders world of unscrupulous vendors, false claims, Holy Grails and the like, the temptation to blame the trader if the system should fail would set a dangerous precedent and basically give the vendor an out (i.e. "it's not our fault, it's the way you're interpreting our system that's got you not succeeding!).

Which hearkens back to Dave's point; the real test of a system should be in specific, repeatable rules that doesn't allow for lots of gray area. Thus, when price does this, you do that, etc. Of course, the broader question is, are there such a set of rules, or will markets always have a gray area which guarantees they will always be an efficient system?

RF

 

[ronfalcone]

contacted from The Edge

their spokesperson James, in response to my questions and concerns, assured me that my e-mail address would be passed along to satisfied users of the Edge; as yet, I haven't heard from anyone and am not sure this is the way to allay my concerns.

So I invite the course developer Betty, once again, to join us here at Trade2Win and address our specific concerns.

As Trade2Win is one of the most influential traders' sites on the internet, it would probably be in The Edge's best interests to do so.

toodles,
Ron

 

[DaveJB]

ZDO,
yup - and it's also quite likely that a designer would perceive the changes as 'clarifying' earlier points. I've seen it before, not just in divergence systems. The latest revision is better for specification though - you now know which bar to look at, and which price to look at, so anyone wishing to try again is perhaps more able to match their charts against the designer's... which is a good move.

Over and above that I have to say that I personally have had enough of it, it'll sit gathering dust for a good while and maybe I'll look at it another time. I don't feel any great need to spend another month trying it out... it's not that dissimilar to a good few 'free' systems and it would be amazing to discover that this one was a huge profit maker while the free ones weren't.... if you make a profit by parameter tweaking it usually doesn't work going forward whilst it looks fantastic in backtest.

All the best to anyone making a profit with it, and to those still trying to.
Dave