But the edge is for the life??

IMO there are some permanent edges in the markets. However, I think that all objectively quantifiable edges degrade over time, because anything that can be turned into a mechanical rule can - by definition - be copied. It is simply a matter of time before other players discover your rule, copy it, and arbitrage away the inefficiency. You can make very good profits while it lasts, but you must be careful to monitor its performance and volatility to detect when it degrades. And you should always be continuing your reserach to find uncorrelated edges which you can replace it with once the performance disappears.

Because of the potential for "copycat" competition, I think that only non-mechanical edges which rely on subjective interpretation (market "feel"/experience) or consistently superior research ability/resources are likely to persist for long periods. The exception would be mechanical edges whose profits are too small for large institutions to bother competing against - for example micro-cap stocks, daytrading illiquid markets, etc.

So, if someone discovered an edge in daytrading the S&P mechanically, I would expect it to eventually go away within a few years. If someone had an edge based on consistently knowing more about a certain industry sector or market than everyone else, then I would expect it to persist. And if someone had developed a good feel for when panic buying or selling had finished, I would expect that to persist too.
 
Edge can also be your ability to continuously find new edges. That is why I spend 25% of the time trying to develop new edges. That way I always have something boiling and that discipline helps a lot in understanding the market and understanding what works and what does not work.
 
Quote from Cutten:

IMO there are some permanent edges in the markets. However, I think that all objectively quantifiable edges degrade over time, because anything that can be turned into a mechanical rule can - by definition - be copied. It is simply a matter of time before other players discover your rule, copy it, and arbitrage away the inefficiency. You can make very good profits while it lasts, but you must be careful to monitor its performance and volatility to detect when it degrades. And you should always be continuing your reserach to find uncorrelated edges which you can replace it with once the performance disappears.

Because of the potential for "copycat" competition, I think that only non-mechanical edges which rely on subjective interpretation (market "feel"/experience) or consistently superior research ability/resources are likely to persist for long periods. The exception would be mechanical edges whose profits are too small for large institutions to bother competing against - for example micro-cap stocks, daytrading illiquid markets, etc.

So, if someone discovered an edge in daytrading the S&P mechanically, I would expect it to eventually go away within a few years. If someone had an edge based on consistently knowing more about a certain industry sector or market than everyone else, then I would expect it to persist. And if someone had developed a good feel for when panic buying or selling had finished, I would expect that to persist too.
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I agree. Its probably harder to develop a profitable discretionary trading style than a mechanical system - and it is harder to copy, so the edge or skill should last longer.

Institutions can't afford to develop discretionary traders especially when they can just walk out the door or demand a payout ratio that leaves peanuts for the company.
 
Thanks for all the answers,

I think this is a real good question and I hope to could read other thinks from all the best members of this forum.
My edge is very simple but in my paper tests with dax and eurostoxx50 futures result very high the win/loss ratio and a discrete gain, I really hope that all this stay long in the future.
The entry is sistematic and the exit discretionary and this help me to perform and become profitable at last,
sorry for my bad english,

Steve
 
As in chess, there is unlimited amount of possible successful strategies. It is, therefore always possible to find one that is better that you are currently using.
Cheers,
 
I got into trading to avoid real work, so having to constantly update my edge book is troublesome.

I've never been in any 'game' that didn't change dramatically over time, usually to the detriment of my edge. No, make that ALWAYS.

Great thread.
 
Quote from ikx:

Hi members,
I find my edge after years of research in the futures markets,
I need to understand if this edge now can I use for all the time that I need , with regular change with the change of the markets where I use it; I wait for advice and answers, sorry for my bad english,
Steve
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If your edge is understanding Risk Reward........Yes at least in my opinion.

Even though many might say that understanding Risk Reward is no particular edge, I feel that Risk Reward is the most important part of any strategy.

Nice weekend to all!
 
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