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What is your edge?

  • #21
  • Apr 30, 2011 9:43pm Apr 30, 2011 9:43pm
Successful traders are successful because they know that as long as the drive-through is open there will be a lot of traffic. That's really all there is to it.
  • #22
  • Apr 30, 2011 9:51pm Apr 30, 2011 9:51pm
Quoting Leonlorenzo
I think the link between "giving people what they want" and "finding an edge" isn't direct. The foreign exchange markets exist so that capital can enter / leave countries freely... understanding when and why this happens can be part of your edge. This is completely true, but Scotty could very well be intending a different slant on it.
Gotcha... So I guess in going back to Scottys first post - Mc Donalds simply take advantage of certain needs and wants of consumers and give them a place to full fill those needs... And in this repsect the markets are no different, in fact the Mc Donalds scenario above IS a market. I'm glad we could establish that.
Time hides Nothing
  • #23
  • Apr 30, 2011 9:59pm Apr 30, 2011 9:59pm
Quoting Scotty B
Successful traders are successful because they know that as long as the drive-through is open there will be a lot of traffic. That's really all there is to it.
Ok... and I think maybe in a very subtle way you're eluding to the fact that not every move in the markets is a profit motivated one. The drive through may be full, not necessarily because people are more in need of Mc Donalds but perhaps they're just sick of K.F.C, or perhaps the Mc Donalds drive through provides a sneaky way of dodging a police road block or avoiding a congested red light... haha... maybe
Time hides Nothing
  • #24
  • Apr 30, 2011 10:04pm Apr 30, 2011 10:04pm
Honestly, all this is very off-topic here guys. I know, I started it, but I tried to pull back with my second long post. Davidee is asking for commentary on his article.
Living the adventure in my head.
  • #25
  • Apr 30, 2011 10:41pm Apr 30, 2011 10:41pm
being a one time forex option,s trader , scalping gamma and gamma ,, always using spreads , , long and short at the same time , well forget using option,s , , spot is where it,s at for me ..
so basically thats my edge , and i also understand now why your benevolent government took away trader,s hedging ability ,,, it is one powerful way to make money ,,,
peace
hemp
Auk,Chicchan,Ahau
  • #26
  • May 1, 2011 12:09am May 1, 2011 12:09am
Quoting hempster
being a one time forex option,s trader , scalping gamma and gamma ,, always using spreads , , long and short at the same time , well forget using option,s , , spot is where it,s at for me ..
so basically thats my edge , and i also understand now why your benevolent government took away trader,s hedging ability ,,, it is one powerful way to make money ,,,
peace
hemp
Auk,Chicchan,Ahau
Hempster, would you be able to elaborate how you use hedging, I have tried many different ways, but cant seem to make it work for me.
I would be very grateful for some advise.

Thankyou.
  • #27
  • May 1, 2011 12:38am May 1, 2011 12:38am
Quoting Leonlorenzo
Couldn't a historical pattern, out of all the millions of possible statistical patterns, which shows a success rate of ~60% merely be a random occurrence? It most certainly could. And just as importantly, what's to stop you jumping from pattern to pattern which has just so happened to have a win rate of X% until your whole account has said "Hast La Vista, Baby!"?
That is why it is important to understand the reasons for the pattern to work. If you don't understand the why, then it really might just be a random occurrence.
  • #28
  • May 1, 2011 12:52am May 1, 2011 12:52am
Quoting Custos
That is why it is important to understand the reasons for the pattern to work. If you don't understand the why, then it really might just be a random occurrence.
My point exactly. The problem is, I get a feeling that the OP's 'reason' will be a mere generalised comment about what is happening between buyers and sellers.

I really don't want to shit on the OP here, so I'll say that the way in which he speaks about the subject of trading as he knows it to be is in an intelligent manner, but he needs to widen his knowledge base to gain the most from it. Like I said before, he's obviously a dedicated guy.
Living the adventure in my head.
  • #29
  • Edited 1:36am May 1, 2011 1:22am | Edited 1:36am
Seems to me most of the "traders" that posted here didn't understand OPs intentions. It is not the question "what is the edge" that interests him, but "what is your edge". In all do respect I think thats the main reason why such threads, pardon me Davidee, die way before anyone gets anything useful out of them. We have a few professional traders around, but having such way of putting the puzzle together, theres no doubts why we hear none/little from them. My post is not to criticize anyone because I am here to share my trading ideas and perhaps collect the missing pieces of the puzzle, as time goes bye. So why not try to be a little more humble with our community so that perhaps we might build something solid and valuable, that could make us earn a buck or two in the long-run, as we are all in the same boat on the suicide mission to hell.

Just my 0.2 pips.

Regards.
  • #30
  • May 1, 2011 2:04am May 1, 2011 2:04am
Quoting belekas
Seems to me most of the "traders" that posted here didn't understand OPs intentions. It is not the question "what is the edge" that interests him, but "what is your edge". In all do respect I think thats the main reason why such threads, pardon me Davidee, die way before anyone gets anything useful out of them. We have a few professional traders around, but having such way of putting the puzzle together, theres no doubts why we hear none/little from them. My post is not to criticize anyone because I am here to share my trading ideas and perhaps...
Yes all true but is there any point asking "what is your edge?" I think it's a questions that attracts the "wrong crowd". I am of the belief taht anyone with a real edge that they had to search and work for years to get is not one that will simply be given away on a forum.

Its easy enough for someone to say something mystic like

"my edge is in the inability of prices to obtain an efficient form in the wake of unexpected events and I profit from the mistakes and predictability of people on a daily basis... Quite simply I buy low and sell high"

And someone might read that and go, "jeez that sounds cool I wish I knew what he knew"

But in reality its just a random and baseless statement about nothing and could mean any number of different things. The problem is unless specifics are mentioned it's too generalized, and if specific are mentioned then it's prob not an edge, as anyone with half a brain would not be so foolish as to give such specifics away...

So in the end I think this is why these threads go no where. It's a catch 22 question with catch 22 answers

Just my 2 pence
Time hides Nothing
  • #31
  • May 1, 2011 2:23am May 1, 2011 2:23am
Quoting CindyXXXX
Yes all true but is there any point asking "what is your edge?" I think it's a questions that attracts the "wrong crowd". I am of the belief taht anyone with a real edge that they had to search...
It's a free world and everyone has a right to ask, but I agree with you. Now, if you are making money day in day out, most of the time, for years, then I really doubt you will let the bird out the cage so easily. On the other hand, nobody will give us anything for free in this world. Everything worth something has a price tag on it and usually a big one. It's a life time adventure and only a few us will make it. One thing I can say that learning to read charts will make you more money then reading private forums as time goes by. The crowd cannot beat the odds, but an individual can...
  • #32
  • May 1, 2011 3:13am May 1, 2011 3:13am
An edge in discretionary trading (if we do not consider insider information), is having those qualities that the least people have, and the most have difficulties in developing:

freedom of thinking, patience, wisdom, non-attachment, discipline.
  • #33
  • May 1, 2011 4:00am May 1, 2011 4:00am
If you hide your candles/bars and place a 'random line'...

If price is above, sell when it hits the random line.

If price is below, buy when it hits the random line.

Common sense tells me this in itself has a 50/50 chance of:

1) price will follow through, allowing the trade to mitigate risk asap.

2) price will fade, generating a small loss (depending on how its managed).

If its looked at like that, then no matter what you do trade-wise, you have a 50/50 chance of making money or losing money (trade management aside).

All is needed, is to sniper the 'instances' where odds are minimum 60/40 in your favor.

Someone mentioned about:

'markets workin the same for years. they go up/down/nowhere...'

If you look at every single market/currency/whatever, and use ohlc bars...

isnt this the same no matter how far into the past you look?

What market do you trade? I trade e/u...I trade this,,,,I trade that...

....I trade OHLC.

Just my thoughts.
  • #34
  • May 1, 2011 4:02am May 1, 2011 4:02am
Quoting CindyXXXX
I am of the belief taht anyone with a real edge that they had to search and work for years to get is not one that will simply be given away on a forum.
Well I think you'd be wrong there. I genuinely do believe that the effects of the long-term trend do provide an edge on markets like the EUR/USD that are driven by economic fundamentals.

I use this 'edge' to trade the EUR/USD. Whenever it makes a new 20 week high so I'll buy it and I'll keep the position open until it fails to make a new high for a few weeks (and vice versa for shorts).

I also like to buy the S&P 500 (I rarely short indexes) whenever it is higher than it was 6 months ago but has dipped to close lower than the lowest low of several days or more, and I'll hold the position (usually for around a week or two) until it makes a fairly recent high.

I can make money doing this and I believe these methods provide an edge. Now I might be wrong about that, I might just be up due to luck and my methods might not provide me with any edge at all, but I'm not being insincere with you in publishing these methods/edges.

So surely you will admit that it’s at least possible for people to have the intention of sharing their edge with others on a public forum? Unless you believe I’m lying and deliberately trying to mislead people about what I believe works and what doesn’t?

On a side note, if I genuinely believed that nobody on this, or any other public forum, would every genuinely try and be helpful I wouldn’t even bother posting.
  • #35
  • May 1, 2011 4:39am May 1, 2011 4:39am
[quote=CindyXXXX;4583189]I am of the belief taht anyone with a real edge that they had to search and work for years to get is not one that will simply be given away on a forum.

It has been my experience that after spending many years developing my trading ability and thousands of dollars spent on my education - it was in fact free instruction given on a forum that pushed me over the line of consistent profitability.

Even though - I still use all the information that I paid good money for to support the free stuff.

It is my understanding that there is no one 'magic bullet' in the market that brings you success - but it is the combination of a number of edges which determines success or failure.

Having said that - my edges are:

1. Trading pullbacks in strong trends (Flag trading the trend thread in FF)

2. Using divergences and hidden divergences in the RSI to read momentum in the market to support entry and exit decisions. (youlearnforex.com)

3. Using Volume Spread Analysis (Wyckoff) to support entry and exit decisions.

Two out of three of these required time and money to learn - but the first is available on this forum for free - and it works.


Lastly i want to make some mention of the difference between a profitable day and a losing day trading - as even with these edges - I can lose money if I don't get enough other things right.


Winning days

1. I take the profit given to me by the market without letting it get taken back on a correction.

2. I patiently wait for the right trade setup.

3. I don't get into the trade early.

4. I only trade the setups I currently want to trade - and believe in. If I see an old setup that I used to trade I ignore it!!!!

5. I don't underestimate the dangerand risk lurking in the market.

On losing days I therefore do not adhere to these 5 things - and I pay the price.


It is one thing to have an edge to trade - it is another thing to trade it effectively.

There are statistical edges and physiological/phsychological edges and both must come together when you trade to get the job done.

Lets not pretend one edge is enough. Successful traders are never one trick ponies.

Good trading all.
Enter Signature
  • #36
  • May 1, 2011 5:03am May 1, 2011 5:03am
Quoting Leonlorenzo
Davidee,

Having read three of your articles, including the one you linked to in your opening post, I have to applaud you on your obvious dedication to what you're doing. Having said that, I have a few issues with some of what you write.

I'll quickly start with your opening post. You state that the three edges you know of are trends, Support and Resistance, and Momentum. I would call these things features of a market, but would have trouble calling them edges because I see no inborn futurity to these these things on their own. What is the probability...

Thanks for your reply Leon,

And thanks to everyone who has contributed to this thread, a few people have definitely given me A LOT to think about.

I'm certainly not one of the people who see near certainties, I'm not doubting that it's not possible for some people to trade like that and be very successful, but I am not one of those people. Even if I were and trading sentiment like that was my edge I don't know how I could quantify it and prove that it existed.

But then, as you say, when trying to quantify a statistical edge I'm only able to quantify that an edge has existed in the past, not that an edge exists now because as the article Craig linked to showed, markets can just change the way they work, sometimes over night.

I still believe (that for me anyway) looking at things in blunt statistical probabilities is the way to go. For example my intuition told me a while ago that the EUR/USD was way overvalued, that the dollar will bounce back when QE2 ends, and that most of the Euro zone is in a much worse position than the USA etc... But statistically speaking, the EUR/USD was higher than it had ever been and sure, the trend could end in the next five minutes but the up trend was there so on a market like the EUR/USD there was always more chance of it continuing in that direction than there was of a reversal. So in circumstance like that it's best to stay long? At least I think it is.

But I do take on board what you're saying though, I'm only able to prove than an edge existed, not that it still exists and markets can change and systems can and frequently do die. An example of a system/edge dying for me would be a 20 day Donchian entry. I did a short experiment on Donchian channels, a 20 day Donchian channel with a time-based exit produced a negative result on the EUR/USD - a market which trends so well and where no other size of Donchian entry with a time-based exit failed to show at least some edge using Donchian Channels

I believe this is because the entry was popularised due to the Turtle Traders experiment. In fact, I once read about a trader who faded it and called it Turtle Soup Another reason I think trading trend breakouts doesn't work as well as it did in the 1970's is because of the amount of speculative money in the markets, on indexes like the S&P 500 it doesn't work at all, quite the opposite in fact. But until 20 or 30 years ago it probably did work on the S&P. So yes, system death is a risk. But I guess I'd need some reason to believe the system had died before I'd dump it - hopefully that wouldn't be right after a huge string of losses lol.

Thanks again, especially for your comments about momentum, very helpful.
  • #37
  • Edited 5:31am May 1, 2011 5:09am | Edited 5:31am
Quoting Davidee
Well I think you'd be wrong there. .
Well it wouldn't be the first time...

I definitely agree that people post with good intentions, hell I've been on my soap box many times preaching things when at the time I thought I knew more than I actually did. If I could go back and erase those posts I would but unfortunately i was just speaking what I believed at the time.

Whether those intentions lead to actual good advice is another matter. But I guess we're all just having a discussion
Time hides Nothing
  • #38
  • May 1, 2011 6:03am May 1, 2011 6:03am
Quoting pescador
An edge in discretionary trading (if we do not consider insider information), is having those qualities that the least people have, and the most have difficulties in developing:

freedom of thinking, patience, wisdom, non-attachment, discipline.
agreed, simply having criteria or a system that put the odds slighlty in your favour is not an edge if the trader does not have the correct psychology and money management system in place and follows it.

in my view to have an edge you need all the boxes ticked and if you dont you wont make money.

every little thing you do can gain you a little bit of an edge over others, simple things like keeping decent records and a diary. you will gain an edge over those who cant be bothered.

its all about finding the peices of the jigsaw and then putting them together to create the complete picture.

its one thing to have a statistical edge, its another thing to make money with it.
  • #39
  • May 1, 2011 7:08am May 1, 2011 7:08am
In any competition game edge is an ability to exploit peoples tendencies to make mistakes that pull them away from Nash equilibrium. If anyone plays perfect their payoff will be one of the equilibrium, depending on the game parameters, it can be positive, zero or negative.
So what is your edge? Opening a store in a non competing environment is an edge if you think of the "location game" that every store owner plays before opening its store.

Whenever someone makes something for other reason then profit he is passing that profit opportunity to someone else.

As for our store owner... he located his store in the city he lives because he didn't want to leave his friends and the competition isn't to bad. He decided to do that for other reason then profit and he is passing the profit opportunity to the next entrepreneur who will go to that city with no competition.
  • #40
  • May 1, 2011 9:15am May 1, 2011 9:15am
In the past years i have been going through trial and errors for a long time until a solid year now. I devolped my own technique but can learn every week something new again.

I think why most poeple struggle i this bussines is just for some simple reasons.

1. They don't follow the bigger picture.
2.They use somekind of systems with some indicators from somekind of guru and take every signal.
3.They overlevarage way to much.
4.They wan to get rich quick.

My advices would be for every newer trader that has a lot of trouble they need to get away from those shorter timeframes.

What are the benifits of those bigger timeframes.

1. The spread because you do less transactions in a week maybe 2 a 3 trades a week or you scaling in (adding to winners)
2.You can keep eyes on more pairs have more time to do propper analysis so well technical and fundamental.
3.Less stress you get more confidence because you following better the trend.
4. Psycholical les stress more relaxed trading because you can even walk away from your screens let the trades run in nice trends.
5.There are many currencies commodities (etc) there are always strong trending pairs ignore the chop.
6.You can use pening orders like buy stops sell stops just below above the dailly candle.
7.Big winners!

I bet if someone just follow the weekly dailly picture and looking at the which direction it goes especially in the currencie market because it trends well they all can do fine.

Oke what are the negative things.

1.If you don't have great entry techniques you will have bigger stops.
2. You will not get rich quick because you don't overlevarage in the start in the beginning with small levarage.
3.You will go through drawdowns ith trades because you can enter on a retrace etc.
4.You will have big losers sometimes.


Regards Ingmar.
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