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What is your edge?

  • #21
  • Jul 10, 2010 9:44am Jul 10, 2010 9:44am
I am a professional trader with both institutional and hedge-fund experience, i have been trading for the past 15 years and still consider myself a ‘student’ of the markets, i view the positive continuation of my learning curve as important as the positive continuation of my equity curve !

For the past 5 years I have been managing both my own account and a fund focused on exploiting opportunities in both the futures and forex markets. My trading strategy is focused around my proprietary “powerlines” I execute trades at or near these levels based on the relevant price action. I do not use any other indicators, oscillators, moving averages or ‘hail mary’ hopefuls. Price is King and the “powerlines” give the parameters of the kingdom in any given time frame. Please see char attached for live vew of EURUSD posiiton
Attached Image (click to enlarge)
Click to Enlarge Name: eurusd3.gif Size: 51 KB
  • #22
  • Jul 11, 2010 4:10am Jul 11, 2010 4:10am
Quoting PowerLTrader
I am a professional trader with both institutional and hedge-fund experience, i have been trading for the past 15 years and still consider myself a ‘student’ of the markets, i view the positive continuation of my learning curve as important as the positive continuation of my equity curve !

For the past 5 years I have been managing both my own account and a fund focused on exploiting opportunities in both the futures and forex markets. My trading strategy is focused around my proprietary “powerlines” I execute trades at or near these levels based...


What exactly are power lines? They look like fib extensions perhaps? Please elaborate on what constitutes a power line.
  • #23
  • Jul 11, 2010 4:13am Jul 11, 2010 4:13am
My edge is utilizing multiple time frames.
  • #24
  • Jul 11, 2010 5:12am Jul 11, 2010 5:12am
Low leverage.
Nothing worth having is easy.
  • #25
  • Jul 14, 2010 2:13pm Jul 14, 2010 2:13pm
Quoting Patience
Low leverage.
+1 on that...

And following Samer's tips...
  • #26
  • Jul 14, 2010 2:27pm Jul 14, 2010 2:27pm
Quoting oldmaster
do the opposite of what a losing trader takes and you should win instead
No you wont.

When you understand why you wont win, you'll be one step closer to understanding what an edge actually is.
  • #27
  • Jul 14, 2010 3:16pm Jul 14, 2010 3:16pm
After reading the posts in this thread, it is obvious only two posters understand the concept of a trading edge: powerltrades and supremechaos.

A "trading edge" is nebulas in the minds of most traders, but by way of simple, working definition, a trading edge is what gives you an advantage over other traders.

Therefore, a trading plan is not an edge, because it does not give you an advantage over other traders. Many traders have detailed plans. The same is true of candle formations, price action, run of the mill indicators, etc. None give you an edge because they are used, for the most part, the same way by everyone who uses them.

PowerLtrades uses proprietary tools, thus an edge. SupremeChaos uses his own experiences (and chocolate). These may not be an edge to you, but to them, they are.

FWIW,

xt
  • #28
  • Jul 14, 2010 3:23pm Jul 14, 2010 3:23pm
Quoting oldmaster
i got it

no doubt, but do the opposite of what a losing trader takes and you should win instead

he/she takes a trade, you take the opposite trade
he/she closes early, you close early
he/she closes late, you close late

such a simple concept, trading against the losing trader and i'm out of the 95% losing side

IMO there's some truth in what you're saying, if you follow the "smart money" vs "amateur money" school of thought. That's in keeping with what the folk in the VSA and orderflow threads are attempting to do. For example, amateur money starts buying into a move while the professionals are exiting.

However, and as a general idea, here's a simplistic example that illustrates a possible flaw in your logic: One trader buys, and another sells, at the same time, and the same price. Both set SLs 10 pips away from entry, and TPs 30 pips away. If price moves 10 pips in one direction, and then 20 in the other, then both traders lose. Here's your problem: from what I've read, markets tend to move sideways 70%-80% of the time.

Hence, and if I may generalize further, there are three market conditions: up, down and sideways. And a trader has three options: buy, sell, or stay out of the market. And to be profitable, it's a case of getting both his entry and his exit "right", at least on balance. Viewed in this way, it's more complex than a mere 50/50 buy/sell.

Another enemy is the spread which both decreases your wins, and increases your losses, regardless of whether you buy or sell. If you're scalping, then spread can become significant, over a large number of trades.
  • #29
  • Jul 14, 2010 3:38pm Jul 14, 2010 3:38pm
Quoting xtsunami
After reading the posts in this thread, it is obvious only two posters understand the concept of a trading edge: powerltrades and supremechaos.

A "trading edge" is...
I tend to disagree. An edge is simply an indication of a higher probability of one thing happening over another. A casino has an "edge" in that they know that of every 1 million $$$$ spent in the casino they will make XX% profit.

The edge is statistical and proven over time. It isn't a "secret weapon" per se. The trader who, according to his method, enters a trade with the expectation of winning and out of every 100 or every 500 trades produces xxx% profit has an "edge that has been statistically proven.
  • #30
  • Jul 14, 2010 4:13pm Jul 14, 2010 4:13pm
ForexFactory have millions of trading methods and most are very different in some ways.Yet all have the same objective in common.Yet all are looking for that trading edge.All trading methods are looking for good results.I have written before it all comes down to the samething,no matter what method you use all must meet at the CROSSROAD of DEST, if you really wan't to make money consistenly.What is DEST?
DIRECTION,ENTRY,STOPLOSS,TARGET.Your focus must be on mastering this,it is the final chapter,it's the moment of truth.I will like anyone to tell me if they can make consistence money without using DEST?How you arrive at your decision is not important,it's all about the getting in management and exits.
  • #31
  • Jul 14, 2010 7:01pm Jul 14, 2010 7:01pm
Quoting TradeRunner
I tend to disagree. An edge is simply an indication of a higher probability of one thing happening over another. A casino has an "edge" in that they know that of every 1 million $$$$ spent in the casino they will make XX% profit.

The edge is statistical and proven over time. It isn't a "secret weapon" per se. The trader who, according to his method, enters a trade with the expectation of winning and out of every 100 or every 500 trades produces xxx% profit has an "edge that has been statistically proven.
By all means, disagree, this is what makes a market.

When I first started in this business in the early 80's, it was understood an edge was simply an advantage over someone else. The casino holds the cards.

You describe the effect of an edge, not the cause. A casino can predict a statistical outcome because they have an edge; the statistical measure does not give them an edge.

FWIW,

xt
  • #32
  • Jul 14, 2010 7:26pm Jul 14, 2010 7:26pm
Quoting kingfisher
'Repeated Pattern'

I trade indices mainly FTSE 100 and there are patterns which gets repeated.
Patterns again & again.

But I'm on pairs. I use;
Sessions,
ALF,
xSweet0050s indys
and the occasional obvious trend line.
Priority is in about that order.

Then set it green & wait ... wait ... mmm next.

cheers scalpz
Target 2 : Stoploss in the green
  • #33
  • Jul 14, 2010 8:27pm Jul 14, 2010 8:27pm
Quoting xtsunami
By all means, disagree, this is what makes a market.

When I first started in this business in the early 80's, it was understood an edge was simply an advantage over someone else. The casino holds the cards.

You describe the effect of an edge, not the cause. A casino can predict a statistical outcome because they have an edge; the statistical measure does not give them an edge.

FWIW,

xt
That's very true. But I think the point was that you don't have to possess some "great secret" in order to trade. You don't have to have an indicator that no one else has or a "magic formula".

For example, experience in itself can be an edge over less experienced traders. Sp your edge can simply be experience or a practiced methodology that has produced a positive outcome.

Regards
  • #34
  • Jul 14, 2010 10:07pm Jul 14, 2010 10:07pm
Discipline consistency
  • #35
  • Jul 15, 2010 12:12am Jul 15, 2010 12:12am
My edge is not trying other peoples edge. Price is king and it is all I operate by, no indicators, no trend lines, all that is on my chart is the price. I can see the important prices for the day just by scrolling back a little. Don't listen to anybody about what the market "must" do. What price it "must" hit. Bologna. It does what it wants to when it wants to, you just gotta catch it.
  • #36
  • Jul 15, 2010 6:08pm Jul 15, 2010 6:08pm
Quoting hanover
IMO there's some truth in what you're saying, if you follow the "smart money" vs "amateur money" school of thought. That's in keeping with what the folk in the VSA and orderflow threads are attempting to do. For example, amateur money starts buying into a move while the professionals are exiting.

However, and as a general idea, here's a simplistic example that illustrates a possible flaw in your logic: One trader buys, and another sells, at the same time, and the same price. Both set SLs 10 pips away from entry, and TPs 30 pips away. If price...
i think you misunderstood hanover, I meant to mirror the exact opposite of a losing traders' moves, not to hedge trades.
------------------------------------------------------------------
So say, Investor A has the following trades below:
Jul 3 Buy EURUSD Open (***) Close (***) Profit +10
Jul 3 Buy EURUSD Open (***) Close (***) Loss -17
Jul 3 Sell USDJPY Open (***) Close (***) Loss -8
Jul 3 Buy EURJPY Open (***) Close (***) Loss -38
Jul 4 Sell EURUSD Open (***) Close (***) Profit +7
Jul 4 Sell EURUSD Open (***) Close (***) Loss -45
Total -- Loss -91

------------------------------------------------------------------
Now, you mirror Investor A trades with the opposite:
Jul 3 Sell EURUSD Open (***) Close (***) Loss -10
Jul 3 Sell EURUSD Open (***) Close (***) Profit +17
Jul 3 Buy USDJPY Open (***) Close (***) Profit +8
Jul 3 Sell EURJPY Open (***) Close (***) Profit +38
Jul 4 Buy EURUSD Open (***) Close (***) Loss -7
Jul 4 Buy EURUSD Open (***) Close (***) Profit +45
Total -- Profit +91


Investor A would be down 91 pips but you'll be up +91 pips instead. So in theory its risky, but someone who is losing 70%, you'll gain 70% in contrast for example. Is that possible?
"There's a big difference between looking successful and being successful"
  • #37
  • Jul 15, 2010 6:59pm Jul 15, 2010 6:59pm
Two things:

Mirroring losing trades is hard to achieve unless you are the house. First, they're hard to figure out exactly (see second response) and second, transaction costs work against you.


Edges can be very simple. One of the biggest mistakes is hunting for really good edges with high win rates or high profit factors because you don't need them. What one needs is the ability to execute each stage of their edge, as planned, without reaction to position or prior trade outcomes.

The way in which the market and the money committed generate emotional and impulsive behaviours in people is one of the main reasons why money is available for the professional. Everything works against the punter. The other main reason is that there is a large amount of money that is not speculative/trading and thus is not competing against your edge but, perhaps, making your edges efficacy possible.

Most people fail to make good money from the markets. Many never had a method that has positive expectancy. But most, even with a method that has positive expectancy, will fail because of the emotional/impulse/behavioural interaction between themselves and the market. They fail to enact their plan.


It is worth looking up posts by TheRealThing. Consider that it might be good to find an edge that is hard to trade and why.
  • #38
  • Jul 15, 2010 7:00pm Jul 15, 2010 7:00pm
Quoting oldmaster

Investor A would be down 91 pips but you'll be up +91 pips instead. So in theory its risky, but someone who is losing 70%, you'll gain 70% in contrast for example. Is that possible?
This is just the same thing as searching for a profitable strategy. If you were to know IN ADVANCE that trader-A has a losing strategy then you would simply swap buys with sells in trader-A's strategy to create a profitable strategy. Then there's no need to wait and see what trader-A will do. This approach would work if trader-A were a losing EA. If you knew IN ADVANCE that this EA's next 100 trades would yield a loss of $6,000, then you could simply swap buys and sells to create a profitable strategy. This just brings up the debate about whether backtesting can reliably predict results in the future.

But maybe you're thinking that trader-A isn't simply an EA with known rules. Maybe it's your buddy, who just happens to suck at trading, and ALWAYS has losing months. Maybe it's his/her psychology, lack of knowledge, etc. Couldn't you just mirror your unfortunate buddy's trades and make a profit?

Well I suppose so, but so what? If your buddy agrees to this scheme, then you're no longer two separate traders. You're ONE TRADER composed of two different people. And the pair of you would simply be cancelling each other's trades every day, yielding zero minus spread. If the awful trader ISN'T your buddy, but is your competition across town, then how would you KNOW what trades they're placing so you could mirror this?

"Aha!" you say. "But what if my terrible trader buddy was trading on a DEMO, and I was trading on a live account?" This gives rise to two objections, the first of which is the backtesting reliability question I raised above. The second objection relates to the common macro-interpretation of the Heisenberg Uncertainty Principle, which in essence says that any possible method that enables us to observe an entity MUST also change that entity in some way. How long before your buddy starts second guessing him/herself and thinking, "OK, will this be the worst possible demo trade I could possibly make? How can I make it lose more so that our live account will make more? Maybe I should adjust the stop a little..." etc. etc.

So, although you've shown that this is possible arithmetically, putting it into practice raises a lot of meta-issues around how it could actually be done.

Now since I've poked my nose into the OP's thread with a somewhat OT response, I'll answer their original question about edges. I like continuous compounding of daily carry interest from high-yielding higher-risk economies with currencies that may be mispriced because not as many people trade them.
  • #39
  • Jul 15, 2010 7:51pm Jul 15, 2010 7:51pm
Quoting capitalist88
This is just the same thing as searching for a profitable strategy. If you were to know IN ADVANCE that trader-A has a losing strategy then you would simply swap buys with sells in trader-A's strategy to create a profitable strategy. Then there's no need to wait and see what trader-A will do. This approach would work if trader-A were a losing EA. If you knew IN ADVANCE that this EA's next 100 trades would yield a loss of $6,000, then you could simply swap buys and sells to create a profitable strategy. This just brings up the debate about whether...

not an EA capitalist88, like I said its risky, its an idea I'm just throwing out.

I'm sure you've come across someone who's constantly looking for the holy grail but failing in the end. Finding someone who is in the 95% losing group is much easier than someone who says they are in the 5% winning group.

In a trillion dollar market, the edge I see most important is experience.
"There's a big difference between looking successful and being successful"
  • #40
  • Jul 15, 2010 7:57pm Jul 15, 2010 7:57pm
Quoting oldmaster
i think you misunderstood hanover, I meant to mirror the exact opposite of a losing traders' moves, not to hedge trades.
------------------------------------------------------------------
Investor A would be down 91 pips but you'll be up +91 pips instead. So in theory its risky, but someone who is losing 70%, you'll gain 70% in contrast for example. Is that possible?
No. It is not possible.

If it is possible, then post your trade on this approach and I will hail you king.

Hanover exactly knew what you are saying... With all respect, it was you who misunderstood what Hanover said. I suggest you try to comprehend what he was saying.
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