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How certain can you be that you have an edge?

  • #21
  • Jun 18, 2009 5:17am Jun 18, 2009 5:17am
It took me time and money to finally find the 'edge'. The edge is not the same for everyone as it depends a lot on personality and risk tolerance. I got wiped out twice, and finally I'm relying on my robots and VPS. Works well for past 2 years. This may not suite everyone and each should look for their own edge.
Adaptive autotrading is the future...
  • #22
  • Jun 18, 2009 5:36am Jun 18, 2009 5:36am
[quote=

Now either ForexFactory is inhabited by the brightest forex minds only, or someone lied to me when they told me that only 2% of forex traders make it!.[/quote]

It is correct. Just that the rest of the 1,300 (actually many, many, many more) either did not read this post or just had no mood to participate because there are not winning and may be busy learning. I know a good number of them myself and I was one myself.

It takes great effort to be a winner and it is no different in forex. Many end up losers after believing the marketing which says it is easy. Some "choose" to learn it the hard way and there is nothing we can do about it.

regards.
  • #23
  • Jun 18, 2009 9:05am Jun 18, 2009 9:05am
interesting ... this is what Rabid said in another thread ... sums up everything ...think about it.

" Edge isn't what you know, it's what you're willing to do and how hungry you are while doing it. "




http://www.forexfactory.com/showpost...2&postcount=38
  • #24
  • Jun 22, 2009 7:30pm Jun 22, 2009 7:30pm
I would venture to say that an edge comes from recognizing opportunity rather than from techniques or simply taking on risk. It's easy to assume that because price has dipped that it is at a discount, however, buying on a dip and keeping your losses smaller than your wins per se is just taking on risk and not based on edge that hasn't been discounted by the market majority.

Again, I believe that trading successfully requires that your edge be based on a unique view which gives rise to opportunity, and other traders and trading coaches who have observed winning traders have said the same thing. Gary Norden mentions this in his book, Ari Kiev refers to this as the variant perception, and all of the global macro fund and prop traders interviewed in Drobny's book went over each of their "outside the box" strategies to find opportunities.

All the best in your trading,

Kris Matthews

Quoting ForexSV
interesting ... this is what Rabid said in another thread ... sums up everything ...think about it.

" Edge isn't what you know, it's what you're willing to do and how hungry you are while doing it. "




http://www.forexfactory.com/showpost...2&postcount=38
  • #25
  • Jun 22, 2009 8:05pm Jun 22, 2009 8:05pm
Quoting kristdm
I love studying psychology and I’ve devoted my life as a trader to studying its role in a trader’s performance as well as its role in a strategy to profit from the markets. I’d like to start a discussion on this and learn from what you all have struggled or triumphed over as well as contribute what my studies have shown....


-Kris

See your account...
The Market pays you to be disciplined
  • #26
  • Jun 22, 2009 8:08pm Jun 22, 2009 8:08pm
Quoting perryg
Firstly I agree with pipmuts points.

The way in which i know that i have an edge is by looking at my statement on my mt4 platform and noting a PROFIT FACTOR of greater than one. I do all my testing manually by taking the trades but many run EA's etc first and if this produces a positive profit factor than this can be comforting knowing that the system has an edge.

Some of the things that Have really helped me have been
[list=1][*]SITTING as stated in reminiscence of a stock operator " it was my sitting that made my money"[*]Being...
To make this perfect, allow me to add that Levingston, author of "Reminiscence of a Stock Operator" also sat tight for weeks or even months prior to taking a position in order to identify right opportunity. He entered gradually (three lots - one soon after a breakout, second on a pullback and third when PA again moved to his desired direction), all this at a right time. He also managed his margin. All this and what Perry mentioned makes a reliable edge. But do remember that in the last part of his book, Levi mentioned that one can beat individual trades but no one can beat the market all the time.
The Thief of Wall Street
  • #27
  • Jun 22, 2009 8:41pm Jun 22, 2009 8:41pm
a simple psychology that works...

just know how much ur ready to lose/win for e day/trade/whatever.

exp players knows that their profit/loss margins doesnt often fluctuate much based on their sizing. coz if it does, then theres sumthing very wrong with the market or theres something very wrong with their MM.
  • #28
  • Jun 22, 2009 9:00pm Jun 22, 2009 9:00pm
i'm not certain of anything. Everyday is different, and that's why i'm lovin it
  • #29
  • Jun 24, 2009 10:38am Jun 24, 2009 10:38am
That's a funny question. I dare anyone here to do this: Go to an UFO club and check how many of them claim to have seen UFO before. If you get my point, then it's good. If you don't, doesn't matter then.

Anyway, I do not think you need any 'edge'. Just trade logically, and with risk management, then you are on your way to financial freedom.

Trade logically = Knowing the reason(s) you make the trades

If you want to know whether you are trading in logical manners, then ask yourself this question: Can you live trade a method without backtesting?
If you answer yes , then you have logic backing your method. Your method works because it makes sense, not because statistics show that from time X to time Y it worked. If you depend solely on stats, your method will cease to work some time in the future, the point of time it ceases to work may or may not be during your lifetime. Time and again we have seen hedge funds making loud noises claiming how great their methods are, but eventually some couldn't survive.

Note: I do recommend backtesting, but it's not a priority.

Example of logical trades:
1) Buffett's value stock.
2) Soros' reflexivity.
3) My proprietary method. (I'm not selling it.)

Hints:
Logical trades are easier with fundamentals, but it can also be applied in technical analysis.
  • #30
  • Jun 24, 2009 2:10pm Jun 24, 2009 2:10pm
Well, I'm very new to forex, but have looked at just about every technical indicator and created probably 100 "systems" to trade with over the last 17 years in stocks and commodities, so although I am confident in many of the "systems" I have created, my horrible Attention Deficit Disorder - Oh look a butterfly! - gets in the way of me sticking with just one methodology.

So, now it's FOREX, and I play around with the measly $500 bucks I have in my bright shiny new live account just to see what kind of trouble I can get into. Well, my account hasn't dipped under $500 yet, so though the profits are tiny and fluctuate with my mood (which "system" will I try to perfect today?!), I sure am having a LOT of fun testing.

For example, I recently had about 21 profitable trades to 3 losers for a good size net gain over about one month. Then I don't trade for a week or two (due to work, etc.) and I FORGET what the heck I was doing that was working so well. GRRRR!

So now, I am looking for someone to build me an EA for one particular method that I won't be able to forget because it will be staring at me from my MetaTrader platform! I just hope it works as well as it is in forward testing when I set it to trade automatically. Does it have an edge - well, looks pretty good so far. Has good entries, captures pips as the move progresses, stops out with decent exits. Who knows, maybe this will be what I need to become a real live boy...errr... professional Forex trader!

Wishing you all massive success,

Eric aka Twitch

P.S. Who here build EAs? I have money to blow! PM me!
  • #31
  • Jun 24, 2009 2:20pm Jun 24, 2009 2:20pm
Quoting Twitch
P.S. Who here build EAs? I have money to blow! PM me!
hint: your PMs are disabled.
  • #32
  • Jun 24, 2009 2:53pm Jun 24, 2009 2:53pm
My edge is recognizing opportunity, going with the market flow and trading small small small. Trading at the proper time of day is also helpful. I take chunks out of the market instead of predicting direction. Its far less mentally taxing than utilizing some grand math. This pip graph of my individual June trades should illustrate what the results of an "edge" look like. I keep my losses very small.
Attached Image (click to enlarge)
Click to Enlarge Name: Picture 1.jpg Size: 78 KB
There's always money in the banana stand.
  • #33
  • Jun 24, 2009 8:04pm Jun 24, 2009 8:04pm
Quoting mikkom
hint: your PMs are disabled.
Hi mikkom,
could you show use a graph off how this indicator i modified to show all candles- signaltable candle, with sl62 tp38(golden ratio) might perform if buy when all are blue and visa versa and post the ea thankyou.
Attached File(s)
File Type: mq4 signalTable candle.mq4   5 KB | 452 downloads
  • #34
  • Jun 24, 2009 11:40pm Jun 24, 2009 11:40pm
Quoting mikkom
hint: your PMs are disabled.
Oops! They're enabled now. I told you I was new to this!
  • #35
  • Jun 25, 2009 12:08am Jun 25, 2009 12:08am
Quote
Anyway, I do not think you need any 'edge'. Just trade logically, and with risk management, then you are on your way to financial freedom.
An Edge is a system or method that gives a higher probability of one outcome over another with positive expectancy.

You can trade as logical as you want and you can have all the risk management you want, but if you don't have an edge you will lose in the end. This is not directed at you personally, I'm just using your comment as a springboard.


Quoting jlryan87
That's a funny question. I dare anyone here to do this: Go to an UFO club and check how many of them claim to have seen UFO before. If you get my point, then it's good. If you don't, doesn't matter then.

Anyway, I do not think you need any 'edge'. Just trade logically, and with risk management, then you are on your way to financial freedom.

Trade logically = Knowing the reason(s) you make the trades

If you want to know whether you are trading in logical manners, then ask yourself this question: Can you live trade a method without backtesting?
If...
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #36
  • Jun 25, 2009 3:59am Jun 25, 2009 3:59am
Quoting fxterrapin
hi fx,

What pair(s) do you focus on?
My apologies for only answering now. I only trade the GU, reason being I have targets to reach in MM, before I can start out fresh on a new currency pair.

I believe that it will work on others as well, maybe changing the TF or so to fit the currency's personality.

IMO the edge is Knowing that you:

  1. WONT win every trade
  2. CANT predict the next bar
  3. HAVE to rule out emotion

After many trail and error I have come to the conclusion that I need to trade like a robot, either having an EA do the job for me and I'll hopefully get to that point at sometime, but for know I follow a simple but effective RULE BASES STRATEGY.

I know that there is more to this IE. Pivots, fibo's trend-lines etc. but this works for me.

Attached is a image to what i refer to. I know this is not a thread for system discussions, but I would like to show that KISS is the EDGE.

The 3 trade option that we all face:

Long Trades from 1-12Jun.
No Trades from from 12-15Jun.
Short Trades from 15-16Jun.

and so on.

M&M

ps. This is my Edge. Definitely not "The Edge" for all.

Attached Image (click to enlarge)
Click to Enlarge Name: TheEdge.JPG Size: 123 KB
  • #37
  • Jun 25, 2009 4:57am Jun 25, 2009 4:57am
Quoting LasVahGoose
An Edge is a system or method that gives a higher probability of one outcome over another with positive expectancy.

You can trade as logical as you want and you can have all the risk management you want, but if you don't have an edge you will lose in the end. This is not directed at you personally, I'm just using your comment as a springboard.
It depends on what definition you give to the term 'edge'. If I change the definition, then well, I have an edge. My edge is a logical trade. A logical trade naturally has a higher probability of hitting TP compared to that of SL. Sometimes a logical trade is a combination of few trades, depending on the R:R. I do not think that anyone can get a "higher probability of one outcome over another with positive expectancy" consistently by not making logical trades. Sometimes you might be making logical trades without even knowing it.

There is a big advantage with logical trades. With a logical trade, you know the reason why the price will move in a particular direction before it happens. If you only depend on stats (or any backtest), there is a luck fallacy. If your historical trades happened to be profitable over a period of time, you may tend to think that you have an edge, but the problem is you couldn't find a reason on why it works other than satisfying the entry requirements (usually some technical formations eg. lines crossing over, price reaches certain line etc). In simple terms, you need to know why certain technical formations gives you the edge (according to your definition of edge). The 'why' part must be a logical reason that can be explained in simple english without maths. Now there's something to caution about: try not to explain in supply and demand because it is very subjective, partly because the real current supply and demand is muddled by people who buy/sell for future use.

As with trades made without logical reasons, you can always pair up whatever justification you believe to your profitable historical trades after it happens. Like the common saying goes: If you buy Google at IPO and sell it years later, you will make a handsome profit irrespective of what strategy you use, be it fundamental, technical analysis, astrology, voodoo or as simple as flipping a coin.

If you want consistency, you will need logical trades. Or you can trade a lot of stats backed system to average out the systems which are at the brink of failing. The drawback is you have to keep looking for new 'edge' (again, according to your definition).

  • #38
  • Jun 25, 2009 5:40am Jun 25, 2009 5:40am
If you look out your window and there is a Ferrari then your edge is certain. If you are making a few % here and there per month its uncertain. With a real edge you should be able to extract more money from the market that you dreamed possible,
Economists have forecast 9 out of the last 5 recessions
  • #39
  • Edited 5:57am Jun 25, 2009 5:43am | Edited 5:57am
Well, we just disagree.

There is only one definition of an edge in Trading.
Using logic in an irrational market is not logical.
The 'why' price moved is irrelevant.

When you have a system with an edge you put your trade on based on your signal. Your system may give you a signal that makes absolutely no sense, but works out. No amount of logic will help with that, it would actually get in your way. When you have a system with a positive expectancy then there is no worry about taking the signals, because in the end you come out ahead.

Anyways, in the end we just see it different.


Quoting jlryan87
It depends on what definition you give to the term 'edge'. If I change the definition, then well, I have an edge. My edge is a logical trade. A logical trade naturally has a higher probability of hitting TP compared to that of SL. Sometimes a logical trade is a combination of few trades, depending on the R:R. I do not think that anyone can get a "higher probability of one outcome over another with positive expectancy" consistently by not making logical trades. Sometimes you might be making logical trades without even knowing it.

There...
Don't wish it were easier, wish you were better. ~ Jim Rohn
  • #40
  • Jun 25, 2009 5:44am Jun 25, 2009 5:44am
Quoting markmm
If you look out your window and there is a Ferrari then your edge is certain. If you are making a few % here and there per month its uncertain. With a real edge you should be able to extract more money from the market that you dreamed possible,
Nice.
Don't wish it were easier, wish you were better. ~ Jim Rohn
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