Originally Posted by Darkstar
Depends on your method I suppose.
A real honest to goodness trader’s edge should provide you with a way of looking at capital markets to discover inefficiencies. Sharing the edge you actually have is gold, but seldom is anyone interested in trying to understand what makes you profitable. So you can share it all day long and it doesn’t make the slightest difference to your profit. When one inefficiency dries up, you can use your edge to locate another one with little difficulty.
Pointing out the inefficiencies will usually destroy their profitability in short order. For an example you can look at news trading. Up until about 6 months ago, there was a gaping hole in Oanda's execution system which allowed a trader to get guaranteed fills on orders during an announcement. A small group of people were making some serious bank exploiting the hole until a few idiots decided they needed to prove to the world how smart they were by showing everyone else how it was done. The army of people flowing into the trade led to a widening of spreads and the death of that inefficiency. I imagine people still make some money trading the news, but not in the same way and the profit is nothing like it used to be.
Most systems being traded have no component of inefficiency to them and as such, no real edge. Almost all of the moving average and other derivative indicator based systems fall under this category. Some methods can be shown to be statistically profitable looking at historical data, but very seldom are they much better then chance (1-5%). Given a large enough sample of data they almost all break down. The reason for this is that the underlying order flow these systems need to win isn't generated by these systems. The likelihood of even 3 traders looking at the same combination of indicators and trading them exactly the same way is almost nil. The moral of this story is that sharing these systems will often have the effect of INCREASING their profitability (albeit marginally) because the effect on the order flow of more people trading at the same time in the same way causes the system to work. Unfortunately the most likely traders of these systems are novices and seldom follow the system exactly or for very long.
Fibs and long term (1hr+) price action system work for the same reason indicator systems fail. The concepts are SO pervasive within the trading community that the core patterns almost always generate order flow that helps them to work. A breakout doesn't work because it's a breakout, but because many people see the breakout and act in the same way. It's with these types of systems that exits become the critical component to success. Lots of people are entering at the breakout, but only the successful have back tested/forward tested different exit rules to determine the probabilities for the best exit. This data provides the winners their edge. It's a smaller edge then an arbitrage situation may provide, but it is still tradable for a decent enough profit.
It's for this reason you find a lot of information about entries but very little for exits. If the exits are what provide the edge, sharing that information will hand a portion of that edge over to someone else. Enough some ones and the profits are gone.
So to make a long explanation short, if the system you’re trading actually has an edge, sharing it will be detrimental for you. If it doesn’t have an edge, share away because it may actually improve it.
Ohh, and if you do manage to find a real market inefficiency, do yourself and those who are already trading it the courtesy of keeping your mouth shut about it. The shiny red Ferrari it will buy you will boost your ego for much longer then the complements of your trading peers.
Luck be with you.
I can't agree with you about the "This is zero game"
In this market, there is huge part of participants, who are not very care about the fluctuations. Like travellers who go aboard, bussiness man who engage international trade, goverment who are trying to control marco economic, etc.
So there is always inefficiency. And we are trying to dig it out and get a share from lion's mouth, like hegde fund. LOL
this is on another thread i've found.
i give 5 stars for this post.
i'll give comment:
Yes, the trader profit 'only' from market inefficiency. this is like finding oil in dessert. when the profitable system become very well known it will eat the hole of ineficiency and the last the hole of inefficiency close out.and become efficient.
bcs this is zero game. when somebody win, someone/something is lost.
what is the motive give cake you found to another? unlimited cake????!! unlimited loser?
please correct me maybe i'm wrong.
Ideally, I'd like to make it before anyone using my system does, but hey, maybe I'll be lucky and they'll want to give back.
