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Where is the EDGE in trading? The most important thing in trading!

  • #81
  • Aug 6, 2011 4:10am Aug 6, 2011 4:10am
Quoting hanover
Agreed, although I would have said "generalizations" rather than "semantics" (now that's getting further off track by discussing vocab semantics - yike!).

Anyway, I don't know why I made my previous post. Especially as I'd promised myself that I'd stay away from these kind of threads. LOL. Just killing time while waiting for the delayed telecast of the rugby.

It doesn't matter if something is lagging, or sometimes unreliable. The bottom line is whether (or perhaps more correctly, HOW) one can somehow use it to trade profitably.

The OP says...
IF, and only if, you have come full circle and now put credit towards something generally labelled as PA/TA/FA/monkeypoo/twinkiemagic/whatever then WITHIN this shit is the edge.

the edge is not saying TA works, no it doesn't, yes it does, but person x can't use it, but person y can use it.... the edge is that DIFFERENCE between one who uses it profitably and the one who does not.

and chances are the edge is not really anything to do with TA/FA/PA/XYZA... it's likely pure luck, or elements that have not been clearly defined and which someone has simply rolled into their methods which they generalize to be TA/FA/PA/whatever and so they now proclaim that their shit works therefore TA/FA/PA works.

bullshit.

here's an edge that most implicitly take advantage of to a degree that doesn't get generalized into PA/TA/FA/XYZA.... don't trade at times of the day, week, year, century, whatever, that shows repeatedly that the market does not move! there! that's not PA. that's not TA. that's not FA.

who gives a shit if saturn is aligned with the moon, or there's a double-top, or a inside bar, or doji, or an upward trendline touching 5 points of the sun god RA, or whatever..... just don't fucking trade if research shows that opening a position at this time simply results in unreliable momentum that reverses itself 20 times going nowhere over the space of the next 3 hours.

where's the magic and pseudo-science? it's just research resulting in an assumption that can help keep one out of trouble and on the safe sidelines. JUST like how everyone assumes painting lines on their charts will result in forecasting the future price, EXCEPT they have not actually researched this and are purely HOPING it to be true... i.e. lazy wankers.

this whole thing is just like saying you need petrol to run an engine. BULLSHIT. you need the right combination of fuel, air, and fire, before an engine will have a chance to work. there's a little more to it than just rolling it all into one big fucking lie of an answer.
Congratulations ScalaFX for coming out of the closet!
  • #82
  • Aug 6, 2011 4:22am Aug 6, 2011 4:22am
I have a trading system that similar to turtle trading system concept.

The points are:
1. Trade with the direction of the trend.
2. Add position to winning trades (after set previous winning open trades to BE)
3. Cut your losses and let your profit run.
4. Use MM and proper position size (small enough to stay on draw down period and large enough to give sufficient profit)

In my opinion the edge of this system come from it's ability to minimize losses when it is wrong and maximize profits when it is right.
The point 2 and 3 are that give that edge.

I am an EA coder and I already made a lot of EAs that give a very good result during a period but bad result during other period. The good period can even run for 2-4 years before finally enter the bad period that wipe out the previous profit.
Based on this, I can say that a currently profit trading system now not always is a real profit trading system. That's why I agree with reres that we need to define our edge and know exactly from where our edge come from. If not, we might only "trade with a failed trading system on a right time on a right pair(s)".
I remembered a time when I tested one of my EA. I run it on H1 and get good result, more than 200% profit for around 2,5 years with 1% risk per trade . I was very happy with the result and thinked "Oh my God, I can be very rich with this system." But I got dissaopinted when I ran the test in Daily period for almost 25 years". The result is still around 200%. Of course I won't trade it if only give me 200% profit for 25 years.
For those who never play with EA, I recommend you to play around with EA in order to see how market can change. After playing around with EA, I see that 2-4 years result is nothing compared with what might happened to your trading system in the duration of 25 years.

This is not saying that I don't believe TA or PA. TA and PA works but perhaps only contribute small percentage of your success. Your real edge might be not come from TA / PA, but on something else that you have on your trading system but you don't realize.

I recommend people to read Graeme's thread "Build equity millipede", it is a good thread.
Graeme use price action and price pattern to time his entry. However, the success doesn't come from it alone. In my opinion, his technique to set BE to his trades, let his trades run and close it discreetionary that give larger contribution for his success.
The entry technique that Graeme use help him to get entries with less losses and tighter stop losses, thus giving him very good result.

I hope no one get offended with my opinion, cause the tension of this thread is a little high.
  • #83
  • Aug 6, 2011 4:29am Aug 6, 2011 4:29am
Quoting hanover
Anyway, I don't know why I made my previous post. Especially as I'd promised myself that I'd stay away from these kind of threads. LOL. Just killing time while waiting for the delayed telecast of the rugby.
Get Sky bro.
The breaking of a wave cannot explain the whole sea.
  • #84
  • Aug 6, 2011 6:21am Aug 6, 2011 6:21am
Quoting nubcake
IF, and only if, you have come full circle and now put credit towards something generally labelled as PA/TA/FA/monkeypoo/twinkiemagic/whatever then WITHIN this shit is the edge. .......
Not sure that I fully understand what you're saying, let alone how to reply.

Now I know why I promised myself to stay away from these kinds of threads. I enjoyed our Win7 vs WinXP discussion rather more.


Quoting Craig
Get Sky bro.
Best advice I've had in a while.
  • #85
  • Aug 6, 2011 6:27am Aug 6, 2011 6:27am
Well, the main purpose why we trade is to make money or the main reason why we are in the trading business at all, The edge in trading is anything that makes you indentify the intra-trend movement at a particular time be it on a 5min ,15min ,30min,1hr and the overall trend movement depending on the type of trader you are. I quite agree with you that most indicators fail most times , the fundamentals are just a bunch of crap. But I know one thing for sure the wave principle can help put you inline with this intra- trend movements even on mini time frames which is almost difficult for us to spot. It take s time to master the wave priciple but if you are commited you will go along way with it,You can use 4hrs and 1hr as the bigger picture use smaller time frames for your intra-trend trading. In the past ,personally I do not suscrbe to using 5 and 15min time frame I put them to test and found out that I can make profits faster rather than waiting for unidirectional market movement to my TP . In the past I would not advice you to scalp but ,my trading lately is taking a new style and theres lots of improvements. I have revisited my scalping habit but I am doing it intune with the trend.


What do I do

1. I use the wave principle as my roadmap on the 1hr and 4hrs time frame to determine the overall trend , I have to do my counts again and again just to make sure that am getting it right
2. I have to determine if market is in its impulsive or corrective phase
3. If it is corrective ,is it in a simple or complex corrective phase ,so that I know what to expect next in case of alternation and so that I know the pip size for my TP

3.If is is in a corrective phase , I know it is time to scalp. If the trend is down and its correcting upwards or sideways I can enter SELL ORDER, SELL STOP and SELL LIMITS without fear I mean on 5min time frame and 15min in case market occationally goes down even within its upwards correction. To only way I stay sane is by setting my TP 10pips 0r 5pips at most 15pips just to make sure that my orders hit the TP and increase my equity. I know that even if market does not hit my TP since the trend is down after the correctiion it will defitely hit it . If it is in an uptrend and the market is correcting downwards or sideways I will use BUY STOPS ,BUY ORDERS AND BUY LIMITS Tp set at 5 ,10 or 15pips . I will always counter trend with LIMITS AROUND support and resistance areas and I will always have in mind when the corrective phase is about giving way for an impulsive wave and since my TP are small ,theres usually no problem it gets my profits and give me a bout of time to think of what next to do.

a. How do I do this ? I know during corrective moves its either I am expecting a 3wave moves ,as in 3 wave up and down I do not mean internal zigzag formation,7waves or 11waves or 13waves or 19
If its 3waves I will know that the 4th wave will be impulsive wave continuation so I will have to stop trading the range and wait for the impulsive move,if its 7wave I will know that the 8th wave will be impulsive if it is 11 then the 12th wave will be impulsive if its 13 then the 14th wave will be impulsive. you can see all this moves my applying your zigzag indicator. I have seen this work all the time ,all the time not what I read it is what I have seen on my charts. Setting your TP close is one advantage I just realised have beautified my trading because I do not use SL and its been part of my trading system for long.

b. During impulse phase I can increase my tp to 15pips , that market is giving 100 or 200 pips does not mean you must catch all the moves 15pips x 10 will give you 150 or even 10pips x 10 . when the wave principle says the trend will be up always set your buy limits without fear,if it says it will be down set ur sell limits without fear. set your TP close because you might get your count wrong sometimes ,if you take your profit and you,re out of the market you can have the enthusiasm to review your count and face the alternative real market direction

Lastly ,position sizing is very important ,start with very low lots , even if you have a $5000 or $10000 account I see nothing wrong with you starting with a lot size of 0.01 for the next 200 to 300 trades before swicthching to 0.02 and use 0.02 for the next 200 to 300 trades before switching to 0.03 if you can do this for the next 24 months you will be surprised how much your $5000 or $10000 will give you. Set long term goals 2years,3years 4years .We are not in competition with anybody, the main reason we trade is to make money and better our world

Remember God in all thy dealings
  • #86
  • Aug 6, 2011 6:29am Aug 6, 2011 6:29am
Quoting reres
Nubcake said it perfectly. Take his advice and think about it. I actually feel sorry for you on the other hand.

Telling people that their mumbo jumbo system into which they put 5 years of life doesnt work is like telling little kids that Santa isnt real. Or like telling religious person that their imaginary God is a logical fallacy in itself.

But the point is this "if you want to be profitable you need to use system with a logic and clear edge. Or else u cannot be profitable. You are than just a gambler."

We should be talking here...
I never said anyones mumbo jumbo systen doesn't work, quite the opposite. I am just trying to tell people to keep an open mind, don't discount any method just because YOU cannot make it work.

No need to feel sorry for me mate, I make a good living trading fulltime from home and have done since 2008. I trade about an hour a day and now fill in time teaching others my mechanical price action trading system.
  • #87
  • Aug 6, 2011 6:58am Aug 6, 2011 6:58am
Quoting hanover
Not sure that I fully understand what you're saying, let alone how to reply.

Now I know why I promised myself to stay away from these kinds of threads. I enjoyed our Win7 vs WinXP discussion rather more.
3 men...

man 1 : tomorrow it will rain. i danced a rain dance today. when i do this it usually rains the next day.

man 2 : tomorrow it will rain. i can sense it in the air, and my arthritic knee is aching. usually it rains within a day.

man 3 : tomorrow it will rain. it usually rains after x days of sunshine and it is due to rain tomorrow.

the next day it is sunny and not a drop of water falls from the sky! they are all wrong and look like fools.

but what if it did rain? i would say that each of the men were full of shit. there's more to it than dancing a rain dance, and more to it than an aching knee, and more to it than a cyclical nature based on some magic number.

what if man 1 only dances when he sees clouds on the horizon but doesn't realize he does this?

what if man 2 gets an aching knee when the weather cools a degree or two further than usual and the air pressure changes?

what if man 3 has simply been lucky with noticing a number of x sunny days equals 1 rainy day, but further historical research would show this to simply be a curve-fit of recent weather patterns?

take man 1 noticing clouds, combined with man 2 feeling changes in air pressure and temperature, combined with man 3 noticing an extended period of one type of weather anticipating a change to be due... what do you get? you don't get a rain-dance equaling an edge. you don't get an aching knee equaling an edge. you don't get a numerical pattern equaling an edge. you get the meat from each of the 3 dead carcass bullshit reasoning's and come to something that has potential for indicating something might be about to happen or is in the process of happening.

TA/PA/FA works for one but not another. therefore it is bullshit to paint successful trading as being the use of TA/PA/FA. an edge does not lie within doing what the majority losers are doing, teaching, and failing at. the terms are too broad and incorporate too much bullshit.

if everyone were to only use TA then there would be winners and losers. if everyone were only to use PA then there would be winners and losers. if everyone were to use FA then there would be winners and losers. THEREFORE, they are not edges. they are nothing but excuses and a framework to get into or out of a trade. they don't provide the profits. they provide the excuse to get in or out.

if it truly is all about simply using TA or PA or FA and there is nothing outside of this that produces the actual profit edge then it can only come down to dumb luck and good fortune that anyone makes a dollar in this game.
Congratulations ScalaFX for coming out of the closet!
  • #88
  • Aug 6, 2011 7:00am Aug 6, 2011 7:00am
Quoting humility
Remember God in all thy dealings
get off the forum if you are going to spew this shit.
Congratulations ScalaFX for coming out of the closet!
  • #89
  • Aug 6, 2011 7:01am Aug 6, 2011 7:01am
Quoting humility
I quite agree with you that most indicators fail most times , the fundamentals are just a bunch of crap. But I know one thing for sure the wave principle can help put you inline with this intra- trend movements even on mini time frames which is almost difficult for us to spot. It take s time to ....
Fundamentals are not bunch of crap. They work and they ultimately determine big trends (just look at intrest rate expectations, thats most important thing in forex in long term) but they have too many variables in them (manipulation included) so its very difficult to integrate them into coherent trading plan becouse the edge there cannot be defined at any particular time. Someone mentioned trading at particular hours of the day. Thats what i call an edge. Statistically it has been prooven that most volaitlity happens on the overlap of EU and USA session. Except for aussie pairs.

Anyway thank you for you long post and maybe someone can find it usefull but you didnt answer most fundamental question. Why? why would this wave principle work?

Quote
Remember God in all thy dealings
This is complete off-topic but god, astrology, palmistry, woodoo and all that supersticious nonsense dont bring any edge in trading either.You will have to take my word on this.
  • #90
  • Aug 6, 2011 7:08am Aug 6, 2011 7:08am
Quoting jag1966
YOU cannot make it work.
Its not me. Its everyone. There is no sucessfull long term purely TA,PA trader. I dont need to trade this way to know this.

Quote
No need to feel sorry for me mate, I make a good living trading fulltime from home and have done since 2008. I trade about an hour a day and now fill in time teaching others my mechanical price action trading system.
I dont want to be rude but i see you are charging money to friends and relatives to teach them PA? This just prooves that u dont have sth which works.
Its one thing to have few millions and than decide to share ur method with 5000 people for 1k each...thats sensible...but taking pocket change from friends and relatives to teach them how to look at patterns is not something respectful. Sorry thats how i see it.
  • #91
  • Aug 6, 2011 7:11am Aug 6, 2011 7:11am
Hello reres,

I will respond systematically:
1. Yes, I agree with you that TA doesn't really work. Or if the TA provides an edge, it is very small and can't cover the expenses(spread, commissions, slippage and so on) over the long term.

If you want to trade something similar, you can go to Quantitative Trading route. Of course, you will need to know a lot of mathematics and also knowing a programming language(java, c, delphy,...).
You can do different type of Arbitrage(for instance, statistical arbitrage) or build different mathematical models and algorithms to identify very complex patterns on the market and try to discover them before competition does. Also with this style of trading, you can use many many different "strategies" in the same time, it helps to diversify and to lower the overall portfolio volatility.

From this style of trading you can extract an edge. The best Hedge Fund who trades based on Quant, is Renaissance Technologies. They have over 15 billions under management. Google them.

2. I agree with you.

3. Fundamental trading is indeed not very easy to use. You have to keep track of a lot of informations but after a while you will get used to it and you will be able to come up with a coherent plan.
Forget about the manipulated news. If you know where to look, you will have very reliable informations which are not as biased as the usual news that you see on bloomberg or other similar sources. But you have to know where to look to find them.

Now I will quote you "and also sometimes price goes in wrong direction despite the fundamentals being correct. "

Here is the point that you are missing. Actually this is what will provide you the EDGE. IF your fundamental analysis is telling you that the price is not going in the right direction, then for you this is an divergence from the "reality" and you start to "fade" that move. Actually you find that move that is cheaper for you. After you saw this imbalance, you enter on the market and then wait for the market to realize that is wrong and then the market will start to go in your favor.
This whole plan work only if your fundamental analysis is very good. So you basically adopt a longer term view. Because yes, the market very often can be very irrationally and wrong on the short term, but you will use this short term move to position for the long term and wait for the market to adjust.

As you can see, trading is not easy and if someone is telling you that is easy... well he is a beginner and he don't know what is telling. Just don't listen to the beginner advice.


I hope it helped.


Quoting reres
Lets say that we solve all the problems with traders psyhology and money managment. Lets say money managment is perfect and the trader is trading like a robot. Knowing that trading is just a probability game and not having problems accepting losses.

Than to make a profit he still needs to have an edge. Just like casino has an edge and it doesnt care if someone wins a jackpot once in a while.

So where excatly is an edge in trading??

1) Technical analysis doesnt work! All indicators are lagging and produce random results due to the fact...
  • #92
  • Aug 6, 2011 7:13am Aug 6, 2011 7:13am
Quoting reres
Its not me. Its everyone. There is no sucessfull long term purely TA,PA trader. I dont need to trade this way to know this.


I dont want to be rude but i see you are charging money to friends and relatives to teach them PA? This just prooves that u dont have sth which works.
Its one thing to have few millions and than decide to share ur method with 5000 people for 1k each...thats sensible...but taking pocket change from friends and relatives to teach them how to look at patterns is not something respectful. Sorry thats how i see it.
Friends and relatives, pocket change, what on earth are you on about, are you on drugs?

I am here to encourage people not the opposite, what a joke.
  • #93
  • Aug 6, 2011 7:22am Aug 6, 2011 7:22am
Quoting jag1966
Friends and relatives, pocket change, what on earth are you on about, are you on drugs?

I am here to encourage people not the opposite, what a joke.
Those that are teaching for money are doing it becouse they cannot make money by trading themself. Thats also a fact. You should be teaching them for free and trying to get feedback through cooperation. You would achieve maybe more sucess that way.

There are just a few exceptions to this rule and those are the famous traders who are actually teaching large groups and already have millions by trading. Noone of them got the millions by TA.
  • #94
  • Aug 6, 2011 7:27am Aug 6, 2011 7:27am
Quoting reres
Those that are teaching for money are doing it becouse they cannot make money by trading themself. Thats also a fact. You should be teaching them for free and trying to get feedback through cooperation. You would achieve maybe more sucess that way.

There are just a few exceptions to this rule and those are the famous traders who are actually teaching large groups and already have millions by trading. Noone of them got the millions by TA.
You spout BS and call it Facts.

Like I said I feel sorry for you.

Good Luck.
  • #95
  • Aug 6, 2011 7:34am Aug 6, 2011 7:34am
Quoting jag1966
Like I said I feel sorry for you.
no. you said that to me.
Congratulations ScalaFX for coming out of the closet!
  • #96
  • Aug 6, 2011 7:53am Aug 6, 2011 7:53am
Quoting reres

Systems which work need to have a logic behind why they work. TA doesnt provide any logic. It can only be usefull in hypotetical case when everyone is looking at the same chart and seeing same pattern. Even in that case it would stop working after a certain time. ?
That sentence clearly demonstrates you have no clue about how the the markets work. It clearly shows your ignorance of what makes up the markets and who your competitors are.
  • #97
  • Aug 6, 2011 7:54am Aug 6, 2011 7:54am
Quoting nubcake
no. you said that to me.
Oh, not sure how that happened, sorry Nub it was meant for resres.

It is all BS anyway.

Like I said I am only here to encourage others to keep an open mind and know that if they keep at it long enough and keep asking the right questions profitable trading can be achieved.

Negativity does no good at all.

Peace
  • #98
  • Aug 6, 2011 8:02am Aug 6, 2011 8:02am
Quoting nubcake
fluff fluff fluff.

none of it makes a damn difference!

do you hear people talking about blackjack edges getting into debates about the importance of cards with square or round corners, or blue / red / black back printed designs, or the importance of the dealer dealing with his left / right hand? do you hear about religion? do you hear about looking for patterns in the numbers on the cards that come out? FUCK NO!

you hear about putting the odds in your favor by keeping tabs on if the dealer is more likely to bust themselves out or not. you...
If you see a pattern that works 90+% of the time does that qualify as a edge?

That's my edge, when I see that pattern I trade it.
  • #99
  • Aug 6, 2011 8:02am Aug 6, 2011 8:02am
I'm still hoping this thread can find it's way back to addressing the original question rather than the back and forth blind arguments about who is right or wrong about TA, PA, or FA. So let me briefly touch on what I think amounts to the "edge" in my trading.

I attempt to get in to a free trade as quickly as possible and then let that trade remain open for as long as possible to gain potentially unlimited upside gains.

On entry, if the price is rising, I buy. If price is falling, I sell. If after entering a trade the price changes direction and goes against me, I get out as quickly as possible, thus keeping my individual losses as small as possible. If the price goes in my favour, I move my stop order to break even as quickly as I can to lock myself in to a free trade. From that point on, if price continues to go in my favour, even with reasonably large fluctuations, as long as my stop is not hit (which I trail), I will leave the trade run with no set profit target. In this way I can gain some truly enormous wins in comparison to my initial risk on entry.

So where is my edge? Well on testing this strategy I found that it is fantastically profitable if I only enter new trades during very specific market hours intra-day. The further either side of those hours that I enter, the less profitable the strategy becomes, until eventually it is entirely unprofitable if I was to enter new trades during the entire 24 hour period.

For me, the edge is a combination of things. Firstly, by trading the highest volatility hours, I have given myself an increased chance of my trade moving in my favour a great enough distance to allow me to move my stop to break even and therefore give me a free trade. Remember I am simply entering long if the price is rising and entering short if it is falling, so I am going in the direction of price "now", and by using high volatility I have apparently increased my chance of the price continuing in the same direction (thanks to the momentum?), just long enough to lock in a free trade.

By trading outside of the best hours (which by the way are consistent day after day, month after month and year after year, and therefore in my mind at least, a "pattern" as opposed to a "shape"), I am greatly reducing my chances of getting to the break even point. So selecting certain market hours is the first part of my edge. My edge reduces and eventually vanishes if enter new trades outside of these hours.

Secondly, I cut my losses very, very quickly, and let my winning trades run indefinitely (potentially) and so I have no limit to how much I can make in profit. It's very basic but my research has suggested this is a genuine edge that provides profitability.

So to sum it up, my edge lays in careful selection of the most beneficial market hours for what I am trying to achieve, combined with making sure my maximum wins are always larger than my maximum losses.

This strategy during back testing showed me the edge existed to varying degrees in all instruments that I tested which gave me the confidence it was a real edge and robust. It has also proven to work for me in live forward testing for several years, which again is reinforcing my belief that it is a genuine edge.

My win rate is appalling by some people's standards. The vast majority of my trades are either full losses or break evens. I get whipsawed constantly on my entry attempts and can have knee trembling strings of back to back losses, and yet as long as I stick to my rules, my edge remains and my profits continue roll in.

Do I have a real edge or blind luck?
  • #100
  • Aug 6, 2011 8:04am Aug 6, 2011 8:04am
Quoting reres
supersticious nonsense
We all cling to our myths. Traders believe in money like the Pope believes in God. You think you can conjure it from thin air and it will make you happy ever after. You seek it with all your heart. You love it. You sacrifice a good proportion of your life to it. It's superstitious nonsense in a business suit. Truth is, trading is highly addictive operant conditioning designed to take your money.

To catch someone, anyone, all you need is the right hook and the right bait.
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