defining "edge" with discretionary trading

[goodgoing]

"Edge" is anything that makes money in some period of time. If it doesn't in another period then it's no longer an edge.

 

[Martinghoul]

I am a developing trader who is just coming out of a phase of experimenting with algorithmic non-discretionary trading. With that approach, knowing what your edge is can be directly quantified with proper back testing. Since then I have abandoned systems trading because I became frustrated with the non-discretionary aspect.....a.k.a ignoring context all together. (and the seemingly inescapable obnoxious drawdowns based on dumb trade after dumb trade). I now am focused on trading with discretion based on market structure context and price action. My question is, as a trader who is making trades based on each specific situation, how do you define what your edge is? You can't back test discretionary trading.

You can back test the individual structures/ profiles that you will base your opinion of context on. However, that is just the same as back testing multiple algorithmic signals and then thinking that merging them together makes for a stronger signal. Then you are back to square one where you only have an edge if you follow the signals without discretion.

So, again, as someone who trades with discretion, what is your edge?

There are only ever two types of edge in the market. Everything falls into one category or another.

 

[Redneck]

There are only ever two types of edge in the market

Yeah..., insider information (illegal)..., and pockets deep enough to influence price / hold simultaneous long / short (outright or otherwise) in same instrument

Neither viable for the independent trader


RN

 

[Redneck]

I would also like to defend my "horse shit" statements.

Cool..., defend away -> but I thought (interpreted your original post) to say you were moving past algo trading and over to manual trading


Nevertheless

knowing what your edge is can be directly quantified with proper back testing.

All the back testing in the world WILL NEVER transfer consistently to what will / is going to happen = No edge

I became frustrated with the non-discretionary aspect.....a.k.a ignoring context all together.

Unless one is trying to catch the spread - never ignore context - rather trade within it

To do otherwise is plain stupid..., and pissing money / emotional capital away needlessly

focused on trading with discretion based on market structure context and price action.

Mkt structure / context / PA - are not discretionary - and since you stated you cannot trade mechanical (dislike the structure of algo trading) - what the hell gives you the idea you can trade manually..., skipping the all important mechanical aspect... and move directly into discretionary manual trading

Every manual trader must have a core structure - both internally..., and with regard to their approach / methodology - then..., and only then - can that trader branch out into discretionary


===================

As to me being an abrasive sonofabitch..., just trying to save you money and emotional capital

If I were to allow it - mkt would chew me..., up then spit me out in a blink of an eye with absolutely no after thought - broke as the day I was born

That's abrasive

And like I said - horseshit

RN

 

[Martinghoul]

Yeah..., insider information (illegal)..., and pockets deep enough to influence price / hold simultaneous long / short (outright or otherwise) in same instrument

Neither viable for the independent trader


RN

Those aren't the two I was referring to...

 

[K-Pia]

Those aren't the two I was referring to...

Anticipatory (Information)
-> Insider
Or Antifragile (Convex Payoff).
-> Too Big to Fail

RN is right.

 

[newwurldmn]

Those aren't the two I was referring to...

You are referring to expected value and a structural advantage.

 

[KMeriwetherD]

Mkt structure / context / PA - are not discretionary - and since you stated you cannot trade mechanical (dislike the structure of algo trading) - what the hell gives you the idea you can trade manually..., skipping the all important mechanical aspect... and move directly into discretionary manual trading

Every manual trader must have a core structure - both internally..., and with regard to their approach / methodology - then..., and only then - can that trader branch out into discretionary

Ok, I see. This all really does come down to semantics. For me there are two approaches to trading discretionary and non discretionary. Both are based in interpreting price and volume or some derivative of them. With non discretionary you are blindly following signals that you have back tested and have (supposedly/ arguable) a statistical advantage. With discretionary trading you might be watching for these same signals, structures, patterns or whatever BUT you are using discretion as to whether to trade on them or not. For example (a dumb example) lets say you have an algo system that says to buy when RSI is 30. If you are a non discretionary trader, you take the trade and follow your profit target, stop level EVERY TIME. If you are a discretionary trader you might notice that RSI is 30 but then you look around and see the market is also in the top portion of a upward trend channel and also notice price action is failing to turn bullish so you decide to disregard the signal based on context. I think you might be attributing "discretionary" to a trader to just goes on gut instincts. For me it is still very mechanical ...... just not blind.

No worries on the "abrasiveness" I appreciate being challenged.

 

[Martinghoul]

Anticipatory (Information)
-> Insider
Or Antifragile (Convex Payoff).
-> Too Big to Fail

RN is right.

No, not these two...

You are referring to expected value and a structural advantage.

I am not entirely sure about the meaning of your terms. Might be what I meant.

The two I was talking about are simply: a) predicting the future (not necessarily through use of inside information); and b) liquidity provision.

 

[KMeriwetherD]

No, not these two...

I am not entirely sure about the meaning of your terms. Might be what I meant.

The two I was talking about are simply: a) predicting the future (not necessarily through use of inside information); and b) liquidity provision.

SMH

I really want to change the title of this thread.
"hey profitable discretionary traders, why do you think you will continue to be profitable"