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Where's The Edge?

  • #41
  • Oct 22, 2022 11:45am Oct 22, 2022 11:45am
Buy low sell high.
Uncertainty of the market must be embraced and accepted.
  • #42
  • Oct 22, 2022 12:10pm Oct 22, 2022 12:10pm
Quoting endroute
there is no single edge but an individual armed with patience the willingness to accept losses reasonable risk management for the style of trading that suites the trader best a solid system to used to identify entries and exists that is consistently implemented a market that is suitable for your trading style ie some markets trend more than others etc most people fail at the first two items and never REALLY move to the point of figuring out the rest. If the trader is able to master the first two items and work to figure out the last 3 they can be...
An edge not being the holy grail for sure but profit made, the individual will set the time scale he is trading for a day a week a month even, thats his edge.
  • #43
  • Oct 22, 2022 2:26pm Oct 22, 2022 2:26pm
[Makhachev the new lightweight UFC champ !]


These are great EDGE discussions.

Plenty of opinions
And while, without grimacing, can some openly ponder the question that just maybe,
when a trader goes ONLY looking external to themselves
have they likely bypassed their greatest resource along the way ?


If maths was the only answer to trading,
I ask myself why wouldn’t everyone, who can just add up, have found success.
How can that not be the case, if it was JUST the maths.

And I often wonder if those who employ true quantatative studies, to succeed in forex,
appreciate it is likely THEIR application of it, and not the simplicity of 2+2.

When a trader can honestly look in the mirror and ask themselves,
if they believe maths is the only answer to success, then
WHY are some still searching.

If it was purely a maths application in Forex then everybody would probably be trading a similar way.
Why do some traders (even maths) trade differently.
What led each trader to their own personal method of maths assessment.
Does maths answer the question why some traders are successful, and some are still on their search.

In the end a seeker of answers, imo, will eventually have to
go back to the true source of all personal success.

In both life (and forex), and way back in times of pre-modern maths/computers/5G/internet,
likely the real catalyst was,
themself.
  • #44
  • Oct 22, 2022 4:49pm Oct 22, 2022 4:49pm
It honestly surprises me when I still hear from other traders that their edge has to do with themselves, either related to patience, mindset, control of emotions, or some sort of characteristic / trait that lies within. I have the utmost respect for discretionary traders who have managed to repeat their successful strategies over and over again, by either consciously or subconsciously following the same, systematic approach that could be extracted and automated.

I have been made aware that emotions are no good in discretionary trading, hence, I took the algo trading route, to completely eliminate the flaws that the human mind brings to trading. I still control the thinking and strategy development, so to a certain extent yes, the edge comes from me, but once that edge has been extracted, it can be isolated and used independently by anybody. I know this for a fact because I took someone else's edge and use it regularly myself in one of my portfolios.

To each his own - Everyone would have something that works for them, and I firmly believe that trading is systematic. An edge can be extracted (either by yourself through quantitative analysis, studying of repeated patterns, or by studying other strategies), and automated through an algo.
  • #45
  • Oct 22, 2022 5:18pm Oct 22, 2022 5:18pm
Quoting carddard
It honestly surprises me when I still hear from other traders that their edge has to do with themselves, either related to patience, mindset, control of emotions, or some sort of characteristic / trait that lies within.

I have been made aware that emotions are no good in discretionary trading, hence, I took the algo trading route, to completely eliminate the flaws that the human mind brings to trading.

I still control the thinking and strategy development, so to a certain extent yes, the edge comes from me, but once that edge has...


Hi Cdd,

Maybe we can think deeper again and include the traits of perserverence, imagination
and also eliminations - of what doesn’t work - to arrive at what does work.


The edge you have utilised for yourself, was actually found BY yourself imo.
Even your past threads show that progress you made was due to yourself.


Myself, I use a combination of both qualitative & quantatative studies to trade, and I imagine most do also (even if they don’t quite realise it).

Quoting TimeTells
IF accepted into the mix then maybe we can apportion a percentage guestimate as to how much IS the Trader (edit: qualitative) and how much left is the quantatative.

Folks who want to make money from forex and who have not found their way yet could of course utilise someone else’s method, and there is nothing wrong with that at all, excellent idea.

I would still argue though that it was them themselves that made the choice to abandon their own searching, through maybe a lack of quick success,
but it was “themselves” that found their best way to arrive at profit in the end realising they weren't making the progress needed (self awareness).


I think too many folk who read the words THEMSELVES and its aspect to trading (in this and other threads)
or hear the phrase “us vs us” move it into a concept of personal advancement and then fall into the trap of it
being a discussion on “psychology".

To me that is not correct, or not in the context that I would use us vs us.

I am talking about a traders own life force and what makes them ‘want” to succeed (even if to piggy-back on someone else’s success, why not, in the end we might learn more than the originator in the long run, who knows).


As with many things on these hand-written forums it is often not language as such but the
word-narrative (non) agreement that sometimes gets misunderstood or misused.


And on that note lol - maybe we should define here first perhaps what we all agree is the meaning of
EDGE.
  • #46
  • Edited 5:33pm Oct 22, 2022 5:18pm | Edited 5:33pm
Quoting Riskcuit
Where's the Edge? {image} After spending many years lurking on trading forums, looking at hundreds, of systems and strategies, I always have been left wondering, where is the edge? The system looks great. The chart is a work of art for Pete's sake. The ideas and logic behind the entries and exits sound logical, but the edge is never seen. All too often, it's nowhere to be found. Some people argue it's in risking less than you stand to make. But simple math easily debunks the idea that a particular risk:reward ratio alone can give you an edge. Technicians...
Hi Riskcuit

Maybe another angle you should look at and one that's always interested me most is not what strategy profitable traders are using but what time frame to they trade to achieve their profits on. Over the last ten years, I have been involved with lots of traders and I have gathered some interesting data. I only took notice when I saw some sort of proof that they were indeed profitable - any here is a rough breakdown.

80% were long term positional traders that held trades for days but often weeks. They were on the Day chart but perhaps using lower timeframes for better entry.
15% were scalping on timeframes no higher than M5, normally around M1.
4% were trading the "death valley" area between M15 to H1 and were generally always grubby.
1% were Algo traders only and always complaining about dodgy data.

Thats data from traders I would consider professional and I have witnessed some sort of proof they have made consistent profits.
There was not one trading platform that these traders have be using that's common, the only common theme I saw is most profitable scalpers were trading US indices, while most long term traders were trading US majors.

Maybe you should start at choice of time frame first, followed by market you would like to trade - then choose a strategy that suits your lifestyle and practice one setup 10,000 times.

Good Luck
Trading thin liquidity at the boundary of the charts
  • #47
  • Edited Oct 23, 2022 1:32am Oct 22, 2022 7:48pm | Edited Oct 23, 2022 1:32am
Quoting RickM
80% were long term positional traders that held trades for days but often weeks. They were on the Day chart but perhaps using lower timeframes for better entry. 15% were scalping on timeframes no higher than M5, normally around M1. 4% were trading the "death valley" area between M15 to H1 and were generally always grubby. 1% were Algo traders only and always complaining about dodgy data. Thats data from traders I would consider professional and I have witnessed some sort of proof they have made consistent profits. There was not one...
Hi RickM, there's a real reason why trading m15 to h1 is called "death valley" area. This segment slot in under intraday swing trading or simply intraday trading.

The empirical evidence from my research showed that this segment is indeed the "death valley" of trading, as in failure is almost certain, success remote.

That's why it's no surprise that we read many FF members wrote that intraday trading is doom to fail, and many who tried fail, learnt from their bad experience migrated to other timeframes and become successful. So be informed, intraday trading the swings, ie. M15-h1 timeframe, is the most dangerous segment of trading with a low chance to succeed.

Besides, the technical reasons as in quantitative aspect of trading, the psychology and mindset pressures are the worst faced under this segment. It's a double whammy.

If veteran traders have spent years knocking your head intraday trade this m15-h1 segment and still fail, it's time to reassess, take stock and migrate out of this "death valley" segment to other timeframes.

Imo, the best chance of success is to trade the day chart and above. That's what the empirical evidence say.

Scalping comes 2nd. And if you're scalping then do it the way that give you the best chance to succeed. Read the tape.

If you're newbie or veteran trader still struggling on the verge of giving up, my advice is trade the day chart. There are plenty of reasons why you may succeed.

However, if you have this dark side urge to gamble, which is perfectly normal, you desire the daily dopamine kick more than and/or together with the money, then go for scalping, but do it the way that allows you the best chance to succeed. Read the tape.(I'm repeating.)

As much as I know and concur that m15-h1 timeframe is the "death Valley" of trading, I trade this segment as an intraday swing trader. Weird isn't it?

The reason is simple. I wrote earlier, the golden pot lies hidden in the most dangerous place where many who went before me fail. What's dangerous and impossible piques my interest. That's the kind of challenge I thrive on, I take on such challenge if the reward is compatible. To explain for my choice so that my post doesn't come across as a contradiction. My purpose for trading Forex is more than just trading for the money.

Btw RickM, very good insightful post that's meaningful for the readers. Cheers
Know what you trade
  • #48
  • Oct 22, 2022 9:02pm Oct 22, 2022 9:02pm
Quoting ryuryu
{quote} Edge is math! 99% here don't know basic math. All they can is to post bullshit day by day with poker faces. But if ask them they will fail to answer basic math questions.
1+2=3. Does that mean I have an edge princess?
  • #49
  • Oct 22, 2022 9:06pm Oct 22, 2022 9:06pm
Quoting TimeTells
{quote} ... And on that note lol - maybe we should define here first perhaps what we all agree is the meaning of EDGE.
Yes couldn't agree more.
  • #50
  • Oct 22, 2022 10:00pm Oct 22, 2022 10:00pm
Quoting FocusWinReal
{quote} 1+2=3. Does that mean I have an edge princess?
What about when 1+2≠3
Why is a Raven like a Writing Desk?
  • #51
  • Oct 22, 2022 10:17pm Oct 22, 2022 10:17pm
Quoting TimeTells
If it was purely a maths application in Forex then everybody would probably be trading a similar way. Why do some traders (even maths) trade differently. What led each trader to their own personal method of maths assessment. Does maths answer the question why some traders are successful, and some are still on their search.
All "math only" based methods rely 100% on patterns statistics. Each algo trader using different patterns for entries/exit conditions. Patterns profitability % fluctuates in longterm. There are 2 kind of patterns: rare (1 entry per year) but highly profitable. And 2nd type are "oscilating".. some period "working" and then "not working". On 2nd case algo trader needs to find when pattern can be used and when stay away of it.

Math needed here is not kind of "2+3 =5" but a bit complex. And without coding skills not possible. You need hundreds and thousands optimizations/backtests/forwardtests etc to find stable setups. And 1 setup you find is not enough. Because those setups profitability fluctuates too...

I would call Forex a totally fluctuating environment. Without stats/probabilities knowledge nothing to do here if trading with algos.
  • #52
  • Oct 22, 2022 11:24pm Oct 22, 2022 11:24pm
Quoting joyny
{quote}
All "math only" based methods rely 100% on patterns statistics. Each algo trader using different patterns for entries/exit conditions. Patterns profitability % fluctuates in longterm. There are 2 kind of patterns: rare (1 entry per year) but highly profitable. And 2nd type are "oscilating".. some period "working" and then "not working". On 2nd case algo trader needs to find when pattern can be used and when stay away of it. Math needed here is not kind of "2+3 =5" but a bit complex. And without coding skills not possible. You need hundreds...

Cheers joyny the maths ball is rolling.


We begin to go down a deep & murky (maths) road here lol, while I am always happy to engage. When discussion IS discussion so thank you.

I have tried in my tiny way in earlier posts to separate two entities in trading.
The Market. And Ourselves.


So I was pleased to read both RickM’s & BWilliams most recent posts as they clearly, well to my way of thinking anyway, have addressed their own (and maybe different to mine, but all is good) understanding of the need at some point in a traders’ career to acknowledge THEMSELVES/OURSELVES as part of the whole learning circle prior to utilising just maths.

(Their each last two sentences,
one beginning ‘markets you would like to trade',
the other “that’s the kind of challenge I thrive on”

BOTH qualitative comments based on themselves or any trader, NO data or quantatative maths research YET
And maybe ask Rick & BW one day how QUICK their path to a real traders knowledge was, though it was probably quicker than mine.
So thank you Rick & BW for your involvement, as at some point being able to help a new trader will be worth it if some might see a message.


Many traders new to markets though might likely be “like I was” at the beginning, ….
“just give me an indi, a calculator & a system and I’ll be okay as I can add up and subtract (for my profits lol)”.


Before any maths & edges though, let me say I did not realise how much of the battle trading would end up being just
..… me vs me in my search instead of me vs the market. Now I acknowledge my innocence then lol.


I might leave all of that non-maths sh!t there, painful for newcomers to read, and boring for the old hands.
I will wait for any definition of EDGE later as someone will educate the crowd on that soon, I am sure.

Joyny has brought up maths, which has to be the obvious next stage of assessment (to find edge) once we have put ourselves in our rightful place
(which is WHATEVER we choose in the long run LOL).
(and apologies to Zoltan, and any others, for posting the results of the main event at UFC 280 earlier won't do that again sorry)

pt2 … shorter, but still writing sorry
  • #53
  • Oct 22, 2022 11:34pm Oct 22, 2022 11:34pm
Okay I realise I have to leave the deeper maths discussions to others here.

I trade now on the Market Mechanics, probably 20% a form of maths, with 80% observational experience of what “markets (forex) do (1 pair).

So when I see volatility for one example, which often has nothing to do with Liquidity, I rejoice.
Setup coming for me is a very good possibility.
I use No maths expansions, distributions or deviations, I use my eyes.
Pretty easy too (but not simple). Or is that vice versa. Doesn’t matter I can see what’s going on lol.


Ending now, over to the maths folk, but finally, when chatting with George (and both Kev & Andy will recall this) George loved the Market Price Expansions as that meant something was “happening” now.
For example if your market could usually do 50 pips at session opening,
and 40 pips of that was already done in a 1 or 2 min candle expansion burst,
then how likely (qualitative, not quantatative) was price likely to continue to do in the next 5-10 x 1min candles.
ie a Clue.


So maybe the maths crew can continue discussion (its NOT about any edge as yet, sorry folks)


What can any hardcore maths folk expand on these offerings from joyny,

Quoting joyny
{quote}

All "math only" based methods rely 100% on patterns statistics.
Each algo trader using different patterns for entries/exit conditions.
Patterns profitability % fluctuates in longterm.
  • #54
  • Edited 12:30am Oct 23, 2022 12:06am | Edited 12:30am
Quoting joyny
{quote} All "math only" based methods rely 100% on patterns statistics. Each algo trader using different patterns for entries/exit conditions. Patterns profitability % fluctuates in longterm. There are 2 kind of patterns: rare (1 entry per year) but highly profitable. And 2nd type are "oscilating".. some period "working" and then "not working". On 2nd case algo trader needs to find when pattern can be used and when stay away of it. Math needed here is not kind of "2+3 =5" but a bit complex. And without coding skills not possible. You need hundreds...
Hi Joyny

After working with a group of 70 Algo traders, also 5 Professional Algo developers (one of which is a three time world Algo trading campion) over a five year period, my opinion is this

THERE IS NO EDGE TRADING ALGO'S ON FOREX MARKETS - if there is an edge, I never found it nor did most in the group.
It doesn't matter if we run 65 EA's on 15 different strategy's, the profits earned never covered the thousands of hours wasted on developing them.

BUT

There is however a trading edge if you decide to trade Algo's on the Stock Markets - results there showed a trading edge

All the math's in the world won't save an EA on a forex chart because the information presented to us in the form of historical data has ticks missing preventing us from back testing correctly. It often misses the top ticks on a trend or a spike which is fraud.

I still have the odd sleepless night over that bad experience and I only fixed the two holes I punched in the trading den wall last christmas.
Thats is my opinion shared by most of the group of 70 traders as well and we ran a folio consisting of over 130 Algo's running as a group on almost any strategy you could name.

If I had to name my number 1 strategy trading an Algo - it would be an inside bar breakout but it could only be run during London sessions and the first half of New York session.


Cheers from a bitter ex Algo trader that returned to the manual scalping world and a happier marriage
Trading thin liquidity at the boundary of the charts
  • #55
  • Oct 23, 2022 12:26am Oct 23, 2022 12:26am
Great posts the question is what is an edge.

One Definition which seems applicable to Forex is :

 

  1. move or cause to move gradually or furtively in a particular direction:

    But then why is it known as an edge?

    Some might say simply a trader who just got lucky?

    Or our individual conditioning makes us as we turn to a meaning for profitiable trading we turn to the singular word Edge.

    It could be said a good working stratergy instead that also works as an Edge however how many really good stratergies make constant profit?

    There are traders here who i know are so much more interlectual than myself so perhaps anothers interpretation might make more sense?

  1. move or cause to move gradually or furtively in a particular direction:

  • #56
  • Edited 2:22am Oct 23, 2022 12:57am | Edited 2:22am
About the use of math in trading.

There's a difference between using math as a tool versus algo trading, they are not one and the same.

Math is the medium to represent an idea about the price characteristic that we perceive. Math give this perceived idea an objective quantification, that's all math does which allows the idea to be measured against the actual market. Historical and forward testing can be conducted. Results come from robust and reliable test experiments. Ofc we know about the pitfalls of testing.

The point is the basis from where we draw conclusion whether the perceived idea has any merit or not can be determined in a more objective quantified manner.

What give merit to this perceived idea is not the math. It's the idea itself at the core that determine the merit. By merit, I mean the trading edge. The math that translate the idea into another medium which is objectively quantified. Example visual output allows the trader to conduct a quick scan. Numerical output allows for comparison against certain yardstick.

That's what math in trading is all about. I describe the role that math play and its usage with math traders.

Now, let's move a little further with math. The output can be numerical data or a visual output, example up or down arrow symbol to represent some condition.

This math output can be used in the expert advisor for automated trading. That's what this talk about expert advisor trading is all about.

Now, central to all this math talk is still this perceived idea about this Forex market. Most people call it pattern. Therefore math traders use math to capture this perceived pattern in the math code. I prefer to call it a price condition, that brings it closer to math.

To the math trader, the most efficient way to capture the pattern is via math. Over and above this, the math trader insist that without the use of math, the potential to scan for pattern is greatly diminished. In short, to the math trader, you can't see what they see because you lack this math tool. And, you're seeing things wrong because seeing with your eyes is a primitive approach that lack the ability of what another trader with math tools can see. Our eyes are too inaccurate that give wrong interpretation and draw wrong or false conclusion. And storing observation from our eyes in our memory the traditional way is just not good enough.

Since the math trader sees a lot more that the non-math trader, store and manage data and information in a much more efficient way, this tool allows the trader to work with more source variables and derived variables from source. At this level the permutations expand exponentially given the primary source data has expanded. This environment of expanded permutation push the frontier of possibilities further into uncharted territory where creative imagination reigns. The possibility is exponential and immense, and since this is virgin territory the opportunity is boundless.

Given this level that math brings us traders who indulge in it to a whole new paradigm of possibilities to work with, only limited to our imagination, what's impossible has been made possible. That the forecasting of certain future price event(s), both in terms of quantum and characteristic, can be possible. The discovery of trading edge comes from our creative imagination.

Such forecasting ability of future price event(s) give the trading edge, whose metrics can be measured.

To summarise, my opinion, trading edge has to be objectively quantified at the minimum. The better and more complete package must include the rational and logical explanation, which in it's absence does not negate the known observation. Cheers
Know what you trade
  • #57
  • Oct 23, 2022 2:42am Oct 23, 2022 2:42am
Inserted Video
Uncertainty of the market must be embraced and accepted.
  • #58
  • Edited 12:27pm Oct 23, 2022 3:38am | Edited 12:27pm
Quoting BWilliam
The discovery of trading edge comes from our creative imagination.

"The discovery of trading edge comes from our creative imagination"

The Human Brain is the best super computer of them all, it's a great pity that we don't harness it's full power.

Computers will do anything for us what we ask it to do, but end of the day the analysis is from - YOU
It never gets easier, you just get better
  • #59
  • Oct 23, 2022 3:46am Oct 23, 2022 3:46am
Do you think edge is at the mean reversion? Finding mean without any data from the charts? One of the edge
  • #60
  • Edited 4:04am Oct 23, 2022 3:52am | Edited 4:04am
Quoting joyny
{quote} All "math only" based methods rely 100% on patterns statistics. Each algo trader using different patterns for entries/exit conditions. Patterns profitability % fluctuates in longterm. There are 2 kind of patterns: rare (1 entry per year) but highly profitable. And 2nd type are "oscilating".. some period "working" and then "not working". On 2nd case algo trader needs to find when pattern can be used and when stay away of it. Math needed here is not kind of "2+3 =5" but a bit complex. And without coding skills not possible. You need hundreds...
The problem here is that ALL you have is open, high, close and low. And you are trying to find the edge averaging that 4 data sets in different ways. That's all.
Every indicator you are using has only open, high, close and low data. ONLY.
O N L Y
There are no other data you all are analyzing. And to hide all the idiocy of the situation and the lack of data, you invent all sorts of non-existent things like "feel the market", "traders mood", "patience", "psychology" and other bullshit.

As for reasoning about mathematics. I'm 100% sure that 99% here don't know the basics. I can write 5 simple questions and none of you will answer them correctly even using Google and spending a couple of days searching for an answer.
But these will be basic questions. Without which it is simply impossible to trade.

p.s. saying you I don't mean you, I mean dreamers around (don't call em traders, they are not).
Observer effect
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