What is an edge?

[new_trader]

If you believe that something is definitely going to happen, you're going along with "everything is known in advance".

You misunderstand the concept of EVERYTHING IS KNOWN IN ADVANCE. It's purple not DarkOrchid!

You might be 99% right, (and I know traders who manage to get 9 out of 10 right), but you cannever account for the unexpected.

I trade with a tight stop.

 

[firewalker99]

one more question

Do casinos have an edge because the croupier at the roulette table has a certain type of "skill" to make the wheel spin, or because the probabilities are known in advance and determine that the outcome over the long run is a positive one for the casinos?

 

[firewalker99]

You misunderstand the concept of EVERYTHING IS KNOWN IN ADVANCE. It's purple not DarkOrchid!
I trade with a tight stop.

Personally, I find it ironic that someone would argue the use of tight stops, while at the same time arguing that everything is known in advance. I wouldn't bother with stops if that were the case.

But anyway, that's not topic of this thread and we are drifting further away, because you keep ignoring the question at hand.

So let me rephrase, do you or don't you have an edge if you can make money, even if you are losing more times than winning?

 

[new_trader]

Do casinos have an edge because the croupier at the roulette table has a certain type of "skill" to make the wheel spin, or because the probabilities are known in advance and determine that the outcome over the long run is a positive one for the casinos?

Does Tiger Woods (whose achievements to date rank him among the most successful golfers of all time.) have an edge even though he doesn't win every single tournament he competes in? If he was to start a golf academy would every single person who attends come out as the most successful golfer of all time?

 

[new_trader]

Personally, I find it ironic that someone would argue the use of tight stops, while at the same time arguing that everything is known in advance. I wouldn't bother with stops if that were the case.

This is because you don't understand the concept, and, you do not understand that you do not understand!! So please, don't talk about it, ok?

 

[FXSCALPER2]

Do casinos have an edge because the croupier at the roulette table has a certain type of "skill" to make the wheel spin, or because the probabilities are known in advance and determine that the outcome over the long run is a positive one for the casinos?

You don't need any skill in a game that is so obviously rigged as a roulette table, which is what I said in the other thread my good friend 'wasp' started. The edge is fixed and it is available out there for any owner of such a table to exploit. Trading is not like that: there is no edge out there which is available for just any owner of a trading account to exploit.

 

[new_trader]

So let me rephrase, do you or don't you have an edge if you can make money, even if you are losing more times than winning?

What I am saying, and have been saying is that an edge cannot be transferred, if it can be, then it isn't an edge. Why? Because an edge gives you a margin of superiority or an advantage over the opposition. Making money is not a valid measurement on it's own because an edge is more or less a relative term. The question is how much would someone make with the same amount of capital? Let’s talk in average points per trade for the same number of trades. A person making 10 points/trade has an edge over someone making 2 points/trade. The 2 points/trade person might be happy with their level of trading until they find out about the 10 points/trade trader. Do you see? Now we are talking about the correlation between efficiency and edges. This is where the discussion would make more sense.

 

[firewalker99]

Does Tiger Woods (whose achievements to date rank him among the most successful golfers of all time.) have an edge even though he doesn't win every single tournament he competes in? If he was to start a golf academy would every single person who attends come out as the most successful golfer of all time?

Again, you're making inconsistent analogies.

I clearly stated that the edge is transferable IF "(b) the person on the receiving end is reasonable intelligent, and (c) that person is disciplined to follow these rules." In case of golf, there are other elements at stake, for example the power that a golfer puts into his swing. In sports, practice makes perfect. In trading, practice helps you read the market better. True. But if you are following someone else's rules, which are for the sake of the example very straightforward and unambiguously defined, than your personal skill at reading the market is irrelevant.

Can Tiger Woods write down on paper how he plays a stroke with effect? He could try, but will another player be able to create the same effect? Not likely. If I tell you how to drift a car into a corner and write down the steps to do it, will you be able to recreate the exact same slide? Again, not likely. But all of this is a flawed analogy.

If a trader acts mechanically, for example on the crossover of some exotic EMA combination, can he write down what he's doing so that someone else can see and trade the same signals? Of course he can.

I'll give you a hypothetical example. Sell the previous day high, if price opens below this level. Buy the previous day low if price opens above this level. Very simple rules.
That are the rules of Trader Joe. Joe writes down explicitly how and where he places his stops, his entries, his money management, etc, etc. Everything is as clear as crystal water. There is no emotion at stay, there's nothing discretionary here, instinct doesn't play a role and Joe never deviates from his plan, no matter what.

Now, let's assume that trader Joe manages to make a profit out of this system on a consistent basis. If he tells trader John to copy exactly what he does, will John make a profit or not? Will the results John acquires be the same as those of Joe, assuming John has the discipline to follow the rules and does not deviate from the plan?

 

[firewalker99]

What I am saying, and have been saying is that an edge cannot be transferred, if it can be, then it isn't an edge. Why? Because an edge gives you a margin of superiority or an advantage over the opposition. Making money is not a valid measurement on it's own because an edge is more or less a relative term. The question is how much would someone make with the same amount of capital? Let’s talk in average points per trade for the same number of trades. A person making 10 points/trade has an edge over someone making 2 points/trade. The 2 points/trade person might be happy with their level of trading until they find out about the 10 points/trade trader. Do you see? Now we are talking about the correlation between efficiency and edges. This is where the discussion would make more sense.

All right, that's definitely a better argument than any of your previous posts.

Using your definition, you're defining an edge as a "comparative advantage over the opposition", and indeed, by definition some else can't have your edge otherwise you lose that comparative advantage.

Using my definition ("An edge is nothing more than an indication of a higher probability of one thing happening over another.") however, there's no reason to assume an edge is something which is exclusive to one individual. For example, suppose any number of people are in a trading room following a leader and executing the exact same trades as he is. They are thus taking advantage of the advantage their "leader" has over a certain part of the competition.

His edge might be his own, but if he tells them, shows them what to do and where to do it - hell he might even hold their hand while pushing the buy/sell button - his edge his no longer exclusive to him alone wouldn't you agree?

It might be more interesting to this debate to ask ourselves, at what point does your edge fails. If everybody is doing what you are doing, than you're obviously going to lose your comparative advantage because there will be no one left on the other side of your trade. This in turn relates to the belief there is or isn't a permanent edge though...

 

[new_trader]

All right, that's definitely a better argument than any of your previous posts.

Using your definition, you're defining an edge as a "comparative advantage over the opposition", and indeed, by definition some else can't have your edge otherwise you lose that comparative advantage.

Using my definition ("An edge is nothing more than an indication of a higher probability of one thing happening over another.") however, there's no reason to assume an edge is something which is exclusive to one individual. For example, suppose any number of people are in a trading room following a leader and executing the exact same trades as he is. They are thus taking advantage of the advantage their "leader" has over a certain part of the competition.

[Made my trade for today so time for fun now. Anyone trading the ESM, might be a long in the low to mid 1390's - not official!]

I am not assuming anything about an edge. You either have one and know you have one and know that it is permanent, or you don't. This is why I am finding it difficult to entertain this discussion.

His edge might be his own, but if he tells them, shows them what to do and where to do it - hell he might even hold their hand while pushing the buy/sell button - his edge his no longer exclusive to him alone wouldn't you agree?

No, I don't agree, not even a little bit. That would be like saying that you are an artist if you can paint a picture by numbers. How many books are written by 'expert' traders? What is the ratio of people have become successful as a result of reading them compared to the total number who have read them?

It might be more interesting to this debate to ask ourselves, at what point does your edge fails. If everybody is doing what you are doing, than you're obviously going to lose your comparative advantage because there will be no one left on the other side of your trade. This in turn relates to the belief there is or isn't a permanent edge though...

Everybody That would be like trying to order lunch for 5000 people and getting them all to agree on a single dish. Just take a look at all the threads about edges!

The edge can't really fail because as I have already tried to explain, it is non transferable, so the odds of someone seeing and consequently acting in precisely the same way is nearly 0. Most of the edge is contained between the ears.

 

[new_trader]

ESM Up 2 points!

 

[firewalker99]

I am not assuming anything about an edge. You either have one and know you have one and know that it is permanent, or you don't. This is why I am finding it difficult to entertain this discussion.

But how do I know I have one? Did Dinos have an edge when he traded profitable for 8 years but had to change his approach last couple of weeks?

No, I don't agree, not even a little bit. That would be like saying that you are an artist if you can paint a picture by numbers. How many books are written by 'expert' traders? What is the ratio of people have become successful as a result of reading them compared to the total number who have read them?

That's beside the point. Reading books alone won't make you a profitable trader, although there are exceptions. Putting in a lot of screen time ('practice') obviously helps, in any endeavor.

The edge can't really fail because as I have already tried to explain, it is non transferable, so the odds of someone seeing and consequently acting in precisely the same way is nearly 0. Most of the edge is contained between the ears.

So the edge is based on instinct, feeling, rather than a set of fixed rules (aka a trading plan)?

 

[new_trader]

ESM Up 3 points

 

[new_trader]

But how do I know I have one? Did Dinos have an edge when he traded profitable for 8 years but had to change his approach last couple of weeks?

A minor and therefore a temporary edge. This is why I only 'listen' to people who's career in this profession spans DECADES. Do you see?

So the edge is based on instinct, feeling, rather than a set of fixed rules (aka a trading plan)?

What is it based on? Understanding and the application of understanding.

ESM up 4 points

 

[firewalker99]

ESM Up 2 points!

ESM Up 3 points

Off topic... but I'm happy for you. Entering mid 90's was pretty late though. Support was at 88-90. Price is already meeting resistance at 1398-1400.

A minor and therefore a temporary edge. This is why I only 'listen' to people who's career in this profession spans DECADES. Do you see?

Suppose it was "minor". 8 years is enough to squeeze out some decent profits. But how do you know, at the time you think you have an edge, whether it's going to stay or not? What characterizes a permanent edge? I'd be very interested in hearing how a trader can determine if his edge is there to stay, or what the odds are that it might be gone tomorrow. Not being sarcastic or anything.

What is it based on? Understanding and the application of understanding.

I think it's fair to assume Dinos knew what he was doing and understood why he was doing it.

 

[new_trader]

Off topic... but I'm happy for you. Entering mid 90's was pretty late though. Support was at 88-90. Price is already meeting resistance at 1398-1400.

That's not where I entered, it's where I made the call. I think it will break through resistance and head for the low 1400's.

 

[new_trader]

I'd be very interested in hearing how a trader can determine if his edge is there to stay, or what the odds are that it might be gone tomorrow. Not being sarcastic or anything.

You and many others. That is what is meant by having an edge, and that's why you don't hear about it

 

[new_trader]

Revised target - 1410-15, but anything can happen

 

[firewalker99]

That's not where I entered, it's where I made the call. I think it will break through resistance and head for the low 1400's.

Trade what you see, not what you think could/might happen.

Revised target - 1410-15, but anything can happen

Didn't really think you'd ever say that.

Good trading.

 

[new_trader]

Trade what you see, not what you think could/might happen.



Didn't really think you'd ever say that.

Good trading.

I've made my trade, so now it's speculation. Honing my skills if you like.