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How certain can you be that you have an edge?

  • #61
  • Apr 1, 2010 11:49am Apr 1, 2010 11:49am
...some phenomena are generally accepted as fact - whether some might choose to believe or not.

It would be too much of a reductionist approach to use Henry Ford or Descartes in order to ponder about the value of forum material.

I am not going to make a habit of branching into a more diverse discussion about what is in my personal view a lost cause.

All the best.

regards
daytrading
Enter Signature
  • #62
  • Apr 1, 2010 11:55am Apr 1, 2010 11:55am
Quoting AstonDan
Did they used to spout such twee remarks at the Liffe DT?

(Hope you're keeping well).

Dan
haha, Dan -

nope - would have got lost in the daily stampede, I guess.

Yes I am good - hope you too.

regards
daytrading
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  • #63
  • Apr 1, 2010 1:15pm Apr 1, 2010 1:15pm
Quoting kk007
"Whether You Believe You Can, Or You Can't, You Are Right" - Henry Ford.

Whatever you believe, it is true to you.
So if two people have simultaneous, but mutually exclusive beliefs, does the Universe undergo some kind of decoherence?
  • #64
  • Edited 1:41pm Apr 1, 2010 1:18pm | Edited 1:41pm
Let's assume you had someone's winning and losing trade percentages. Along with their avg win and avg loss, and some number of (x) trades... you calculate their profits.

ie: 60% wins 40% loss R:R 1:2 units so over 1000 trades,

.60(2) - .40(1) => .8 units x 1000 trades = 800 units profitable.

With those same numbers in the example, what is the probability of this happening by "chance" over 1000 trades (being 800 units profitable) ?

Forgive me, I see that someone posted a link to the Central Limit Theorem after Craig's post. I'll have to work through it.

My question's not phrased well... perhaps I should restate.... assume someone with a R:R of 1:2 units and 1000 trades (win % unknown). What is the probability of them being 800 units profitable after 1000 trades?

Thanks in advance.
  • #65
  • Apr 1, 2010 1:23pm Apr 1, 2010 1:23pm
Wouldn't you assume a normal distribution for each 1000 trades sample.
So the return should lie within 2SDs of 800 most of the time.
  • #66
  • Apr 1, 2010 11:03pm Apr 1, 2010 11:03pm
One fails; one succeeds.

Quoting Ted1983
So if two people have simultaneous, but mutually exclusive beliefs, does the Universe undergo some kind of decoherence?
  • #67
  • Apr 1, 2010 11:22pm Apr 1, 2010 11:22pm
Quoting kk007
One fails; one succeeds.
That is untrue to a certain extent. I do not see the money management aspect in this discussion.

It is completely possible for 2 people with mutually exclusive beliefs to still make money.

Of course if we take out MM from the equation then you are right. One will win and one will lose.
  • #68
  • Apr 1, 2010 11:26pm Apr 1, 2010 11:26pm
Yes. You are right. That is untrue to a certain extent, and true to the other extent.

Quoting thelws
That is untrue to a certain extent. I do not see the money management aspect in this discussion.

It is completely possible for 2 people with mutually exclusive beliefs to still make money.

Of course if we take out MM from the equation then you are right. One will win and one will lose.
  • #69
  • Apr 2, 2010 12:19am Apr 2, 2010 12:19am
I know my intentions. That's my edge.

My short-term intentions are to be successful enough at forex
to earn a six-figure income in USD and to live in a
nice condo somewhere. Then I'll plan bigger.

The market can not take away your intentions from you. Note the
following signature quote:

Quote
__________________
Intention is more important than action. What you make up your mind to do
is more important than what you actually do… -- Mike Hernacki
HELL IS EMPTY, ALL THE DEVILS ARE HERE. -- Shakespeare
  • #70
  • Apr 2, 2010 1:24am Apr 2, 2010 1:24am
Hmmm ... I guess you have to get 1000 traders, get them trading using the same strategy, and see the distribution of their returns?


Quoting Intu
Let's assume you had someone's winning and losing trade percentages. Along with their avg win and avg loss, and some number of (x) trades... you calculate their profits.

ie: 60% wins 40% loss R:R 1:2 units so over 1000 trades,

.60(2) - .40(1) => .8 units x 1000 trades = 800 units profitable.

With those same numbers in the example, what is the probability of this happening by "chance" over 1000 trades (being 800 units profitable) ?

[color=red]Forgive me, I see that someone posted a link to the Central Limit Theorem after Craig's...
  • #71
  • Apr 2, 2010 9:24am Apr 2, 2010 9:24am
Quoting thelws
That is untrue to a certain extent. I do not see the money management aspect in this discussion.

It is completely possible for 2 people with mutually exclusive beliefs to still make money.

Of course if we take out MM from the equation then you are right. One will win and one will lose.

I was talking in a general sense. For example someone may believe that a god made the Universe. I don't believe that. Therefore one of us is wrong.

kk007 stated, "Whatever you believe, it is true to you."
That just strikes me as wish thinking and dangerous "wishwashery".

Of course you're right with regard to the markets, its just a question of timeframe and position size.
  • #72
  • Apr 2, 2010 9:38am Apr 2, 2010 9:38am
Quoting blunderbuss
I know my intentions. That's my edge.

My short-term intentions are to be successful enough at forex
to earn a six-figure income in USD and to live in a
nice condo somewhere. Then I'll plan bigger.

The market can not take away your intentions from you. Note the
following signature quote:

More wishful thinking, with 0 substance to back it up.

My intention is to go long on GBP/USD and for it to be at 10.0000 (make that 20) on monday morning. How does that sound?
  • #73
  • Apr 2, 2010 9:51am Apr 2, 2010 9:51am
You just don't understand what blunderbuss actually has tried to say.

Quoting Ted1983
More wishful thinking, with 0 substance to back it up.

My intention is to go long on GBP/USD and for it to be at 10.0000 (make that 20) on monday morning. How does that sound?
  • #74
  • Apr 2, 2010 10:19am Apr 2, 2010 10:19am
Quoting kk007
You just don't understand what blunderbuss actually has tried to say.

I do.
  • #75
  • Apr 4, 2010 10:00pm Apr 4, 2010 10:00pm
Quoting Ted1983
More wishful thinking, with 0 substance to back it up.

My intention is to go long on GBP/USD and for it to be at 10.0000 (make that 20) on monday morning. How does that sound?
I was referring to goal-setting and persistence, not market-driven
telekinesis. (Although I've tried that, too....) If I have to adjust
my strategy because there's some kind of flaw in it, then that's what
I'll do.

My (hidden) point was that I don't believe that rigid processes or
"the latest software" are the answer. I'm a firm believer in the adage
that by the time you learn the rules of the game, they change
the rules... (That applies to any game.) People on this website will
swear up and down that DIBS is the answer; others will swear by
Ichimoku. Could it be that their desire came first, and that the
methods they chose just fell into their laps?


Intention and commitment are everything. The process that you use
to achieve those two goals will present itself. And if FX really is the
best use of your talents, opportunities will arise where none had
previously existed.

Quote
"...when you want something, all the universe conspires in helping you
to achieve it.”
-- The Alchemist by Paolo Coelho
HELL IS EMPTY, ALL THE DEVILS ARE HERE. -- Shakespeare
  • #76
  • Apr 5, 2010 12:41am Apr 5, 2010 12:41am
It seems there are a few popular definitions of "edge" that people have been using:

1. Some say "edge" means you have a positive expected return / expectancy / expected value.

expected return = (average win)*(% winning trades) - (average loss)*(% losing trades)

That's just a fancy way of calculating your average profit per trade (sum up total wins and losses and divide by the number of trades).

Now I agree, sure, if your average profit per trade is positive, you'll make money. The problems is: your expected return changes over time. So how do I know it will stay positive in the long run?

2. Other people seem to use the word "edge" to mean they know something that most of the market doesn't know. Like some sort of secret weapon. Again, how do you know it will stay a secret? How do you know the market won't figure it out? How do you know that other people don't know it too?

3. If "edge" means knowing that you will continue to be net profitable on average, then I agree with the majority here in that I don't really know. Of course I hope so, but how could I be certain?

4. Overall, I think I agree with blunderbuss in that my edge is my perseverance. As long as what I'm doing now continues to work, I'll stick to it. If it stops working then it's back to the drawing board and I'll find something that does work. It's like an industry leader that tries to maintain its competitive edge in business. Another company could come in and do it more efficiently, but you do what you can to try and stay on top.


I think flexibility is key. It's yet another paradox of trading: You have to be disciplined and stick to your system. But you also have to be flexible. Figure it out.
  • #77
  • Apr 5, 2010 12:54am Apr 5, 2010 12:54am
Forex is Chess.
Accept it or not, that's your choice.

Why fight a battle you cannot win???? Huh???
Wasted effort...
Wasted time...
Unecessary stress...
Unecessary loss...

Forex is Chess. The market is like Ghandi. The market is like
Martin Luther King, Jr. The market is like Ho Chi Minh.
TIP: It's a losing battle if you are against the market!

Fight with the market and you will have unecessary stresses and perhaps
unecesary losses. Don't blame your ills on others and start
attacking people left and right. This means you are seriously burned out.

Just go with the flow and accept what the market giveth.
  • #78
  • Apr 14, 2010 3:40am Apr 14, 2010 3:40am
When you have edge, you start to analyze more effective. but you still scare that you can lose what you have.
  • #79
  • May 29, 2010 7:47am May 29, 2010 7:47am
edge? are we talking about blades here like of the sword just kidding, well i have an edge and that's for the start
Success consists of going from failure to failure without loss of enthusiam
  • #80
  • Last Post: May 29, 2010 6:38pm May 29, 2010 6:38pm
if your acct is growing steadily and consistently, you have an edge but it's hard to really quantify what it is. it's different for everyone. know that well-known and respected traders. cannot really explain to others what their edge is that makes money for them. it's kind of a self-awakening thing, the aha moment. thanks
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