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An Edge In The Markets

  • #41
  • Apr 25, 2011 8:58am Apr 25, 2011 8:58am
Quoting Guerrillawar
Its interesting that people persist in believing that mindset is the most important thing. One individual who I love to read is Dr. Steenbarger. Even he a psychologist dismisses all this about mindset being the key element. He believes in the mastery principle which I strongly agree with. Its also fun to read what his thoughts are about Mark Douglas and the like. If you read carefully you will see what he thinks about him.

Bottom line you profit in the markets by having an edge and then not getting in the way of your edge. Go to Wall Street...
By belief is that if you do not have the correct "mindset" and intestinal fortitude at the beginning, you will not be able to endure the months and sometimes years of unprofitability before you finally find a consistently profitable trading system.
  • #42
  • Edited 9:24am Apr 25, 2011 9:10am | Edited 9:24am
Quoting Troikaone1
By belief is that if you do not have the correct "mindset" and intestinal fortitude at the beginning, you will not be able to endure the months and sometimes years of unprofitability before you finally find a consistently profitable trading system.
There is no such thing as a consistently profitable trading system. Only methodologies can be consistently profitable. Markets change and adapt therefore systems must change. There were great systems of 2008 that would perform horribly in current conditions. You make systems to fit conditions not conditions to fit systems.

The markets are place where some of the best and brightest come to trade against each other. You have no business trading without an edge or you will be destroyed. To think otherwise is a disrespect for the market and the professionals who operate in it. Here's a good analogy picture some middle school students trying to play competitive rugby against the All Blacks. The students have no business being out there they will be slaughtered and probably severely injured. Nothing to do with mindset just common sense. Traders have no business trading real money until they have developed a legitimate edge and a chance of success. Was it the middle school childrens fault they lost? Of course not they shouldn't be on the pitch for another ten years. Same as trading no different!!!
  • #43
  • Apr 25, 2011 9:32am Apr 25, 2011 9:32am
I like where this thread is going. I'll throw in another question.

How do you know when you have an edge? And more importantly how do you know when your edge is not viable anymore?
  • #44
  • Apr 25, 2011 9:41am Apr 25, 2011 9:41am
Quoting Guerrillawar
There is no such thing as a consistently profitable trading system. Only methodologies can be consistently profitable. Markets change and adapt therefore systems must change. There were great systems of 2008 that would perform horribly in current conditions. You make systems to fit conditions not conditions to fit systems....
Ooops....I meant to say the following in my post:

"By belief is that if you do not have the correct "mindset" and intestinal fortitude at the beginning, you will not be able to endure the months and sometimes years of unprofitability before you finally find a consistently profitable trading methodology."
  • #45
  • Apr 25, 2011 9:48am Apr 25, 2011 9:48am
thats a simple question, you know youre edge is still valid if youre still consistently making money.
u lose when wrong you gain when right

but i agree with guerrillawar there cannot be a system, it is you and your style of trade, your methodology the capacity to analyze price and changing market conditions
AVT INVENIAM VIAM AVT FACIAM
  • #46
  • Apr 25, 2011 9:51am Apr 25, 2011 9:51am
Quoting Guerrillawar
There is no such thing as a consistently profitable trading system. Only methodologies can be consistently profitable. Markets change and adapt therefore systems must change. There were great systems of 2008 that would perform horribly in current conditions. You make systems to fit conditions not conditions to fit systems.
Except if your system can adapt to changing markets.
  • #47
  • Apr 25, 2011 9:52am Apr 25, 2011 9:52am
Quoting Nervousone
I like where this thread is going. I'll throw in another question.

How do you know when you have an edge? And more importantly how do you know when your edge is not viable anymore?
simple one-word answer: research

Through research we know if we have an edge and if it is decreasing or not.
  • #48
  • Apr 25, 2011 9:53am Apr 25, 2011 9:53am
It is true that reciting a bunch of psycho-babble all day will not help you trade any better. You have to actually study price action intensely until you are blue in the face. It is VERY HARD WORK......all of the psycho-babble is simply a subset of the overall effort required to be consistently profitable. Is it necessary?......yes.....but it is not the ONLY thing you need to be successful.
  • #49
  • Apr 25, 2011 9:54am Apr 25, 2011 9:54am
Quoting Troikaone1
By belief is that if you do not have the correct "mindset" and intestinal fortitude at the beginning, you will not be able to endure the months and sometimes years of unprofitability before you finally find a consistently profitable trading system.
Tell that to all the gamblers in (online) casinos who never become profitable. Trading tends to become an addiction like gambling.
You don't need a certain mindset to remain in this field for years, you become addicted.
  • #50
  • Apr 25, 2011 9:57am Apr 25, 2011 9:57am
Quoting Nervousone
I like where this thread is going. I'll throw in another question.

How do you know when you have an edge? And more importantly how do you know when your edge is not viable anymore?
You know when you have an edge there is no confusion. Trust your feelings they will tell you if you have one or not. There should be no doubt. Typically you will make money just about everyday and when a losing day takes place it will be properly managed so its not devastating to your book. Basically you shouldn't lose more than two or three days worth of profits when you have a bad day. If you can make your bad days to be worth only one days worth of profits and it doesn't occur with much frequency you have a very very good edge.

Just my opinion. The easiest edge to find in the markets is to trade reversals properly. However, you must be skillful to be able to tell the difference of a one way trending market. Or the possible early stages development of a one way market. That part takes skill and experience no shortcuts. If you look at todays PA it was nothing more than nice reversal trading in Eurusd.
  • #51
  • Apr 25, 2011 10:00am Apr 25, 2011 10:00am
Quoting Nervousone
I like where this thread is going. I'll throw in another question.

1) How do you know when you have an edge?

2) How do you know when your edge is not viable anymore?
1) IMHO when your av. win is bigger than your av. loss. The biggle the trade sample (100-500-5000....) the better.

2) This is something im keen to hear because all methods/systems have their natural DD periods. But at what point do you ''KNOW'' if the DD is getting out of control?

Probably wrong haha. But this is getting interesting. Good topic
  • #52
  • Apr 25, 2011 10:03am Apr 25, 2011 10:03am
Quoting Pipalicious
2) This is something im keen to hear because all methods/systems have their natural DD periods. But at what point do you ''KNOW'' if the DD is getting out of control?
You know it when your DD becomes deeper than what your reserach indicated. It might be an outlier, but it's more likely that the edge is decreasing.
  • #53
  • Apr 25, 2011 10:03am Apr 25, 2011 10:03am
Quoting Custos
Tell that to all the gamblers in (online) casinos who never become profitable. Trading tends to become an addiction like gambling.
You don't need a certain mindset to remain in this field for years, you become addicted.
I will have to respectfully disagree with you on this one. Gamblers and traders are two different species. I will never, ever consider myself a gambler. However, if a person has never seen a FX chart in his life and wakes up one day and decides to just sell 10 lots out of the blue....I would consider that a form of gambling.
  • #54
  • Apr 25, 2011 10:06am Apr 25, 2011 10:06am
Quoting Troikaone1
I will have to respectfully disagree with you on this one. Gamblers and traders are two different species. I will never, ever consider myself a gambler. However, if a person has never seen a FX chart in his life and wakes up one day and decides to just sell 10 lots out of the blue....I would consider that a form of gambling.
Read some psychology books on addiction. Read pawlow's research (with his dog) on how to trigger emotions - it has a lot to do with becoming addicted.

If you get INFREQUENTLY rewarded and punished, you will become addicted. As far as I am concerned any gambler and trader with no edge will be infrequently rewarded and punished by the casino / market. That can lead to addiction.
  • #55
  • Apr 25, 2011 10:09am Apr 25, 2011 10:09am
Quoting Custos
Read some psychology books. Read pawlow's research (with his dog) on how to trigger emotions - it has a lot to do with becoming addicted.

If you get INFREQUENTLY rewarded and punished, you will become addicted. As far as I am concerned any gambler and trader with no edge will be infrequently rewarded and punished by the casino / market. That can lead to addiction.
As a child I was passionate about sports....and I played constantly. When I became older.....I became passionate about mathematics.....so I pursued and obtained an Engineering degree. Just because you have passion for something and are dedicated to it doesn't mean you are an addict.

There are some people who can go to Vegas.....blow a bunch of money and then go back to their daily lives. Then there is another fraction of the population who will move to Vegas just to play the slots.......unfortunately that is life. In the same respect.....there are some folks who trade FX (I will not call them traders) and they will mortgage two houses just to fund their account......unfortunately that is life and things like that happen.
  • #56
  • Apr 25, 2011 10:12am Apr 25, 2011 10:12am
Quoting Troikaone1
As a child I was passionate about sports....and I played constantly. When I became older.....I became passionate about mathematics.....so I pursued and obtained an Engineering degree. Just because you have passion for something and are dedicated to it doesn't mean you are an addict.
Problem with addictions is that you normally don't know when you are addicted and when not. But if you can remain away from the markets for extended periods of times (months to years) without needing any psychological help then of course you are not addicted.

I just say, through these infrequent rewards and punishments, trading tends to lead to addiction, like gambling.
  • #57
  • Apr 25, 2011 10:15am Apr 25, 2011 10:15am
The best traders in the world are addicted to the game. Its not a job for them its their calling in life. If you are a winner and your family will put up with it theres nothing wrong with being addicted. Can you imagine how bland this world would be if Beethoven wasn't addicted to music or Mozart. Or Monet to art.

However you must be winning and successful There is nothing worse than the degenerate gambler who will gamble away his rent or mortgage.
  • #58
  • Apr 25, 2011 10:17am Apr 25, 2011 10:17am
Quoting Guerrillawar
The best traders in the world are addicted to the game. Its not a job for them its their calling. If you are a winner and your family will put up with it theres nothing wrong with being addicted. However you must be winning There is nothing worse than the degenerate gambler who will gamble aways his rent or mortgage.
yes, totally agree with that. If you are addicted and win consistently, then you are definitely on top of the world.

The best people in the world are actually addicted to what they do, but they also have a good "edge" on how to get out on top.
  • #59
  • Apr 25, 2011 10:20am Apr 25, 2011 10:20am
Quoting Custos
Problem with addictions is that you normally don't know when you are addicted and when not. But if you can remain away from the markets for extended periods of times (months to years) without needing any psychological help then of course you are not addicted.

I just say, through these infrequent rewards and punishments, trading tends to lead to addiction, like gambling.
I agree to some extent.......but the only thing a consistently profitable trader is addicted to is making money in my opinion. However, a weak minded person will definitely go off the deep end trying to trade any market. It is not for the faint of heart.....trust me!
  • #60
  • Apr 25, 2011 10:21am Apr 25, 2011 10:21am
like ive said before a system with an edge and psychology is not equal success

a robot has all the psychology in the world cause he doesnt have one
and can execute to perfection, however robots have drawdowns and lose money. why?

this is a skill an art not a sience

you need to have:

A Purpose strong enough to give you the will, the hunger, the strength to succeed and continue in this field, you have to want it bad enough.

you need to know: when youre trading, not only what time of the day but be aware of what is happening in the world, when CBs will release data, periods of low or high volatility, hig or low volume.

market structure: you need to know what type of market youre trading, ranging, trending, consolidating, toping, bullish, bearish. key areas in your chart and watch that indeed price will react, because just because its done it in the past doesnt mean it will do it this time. how strong is price moving, what is the dollar doing, whats the interest rates, the gdp,

this is where you combine technical and fundamental analysis, ive always said fundamentals give direction technical gives timing

psychology: find your threshold of pain, trade smaller lots if needed, be able to trade the plan and not be afraid of money. is your position still valid, are you trading changed pictures? know when to Hold, press, scale back, or liquidate

finally: calculation, money management, discipline, understanding how to use your resources to work for you, learn to use your margin, learn to use your account as part of your trading strategy
AVT INVENIAM VIAM AVT FACIAM
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