Edge edge edge , what is it ?

TurtleLearner

TurtleLearner

Bonjour/Bonsoir ET , it's again your turtle learner , hope you're fine .....

So this time , my question is about edge , before made any misconception ,I'll clarify what I try to said but what's it
So I read this word edge so many time in market wizard and was a little bit confuse cause I doubt if t's just about "the trading system" that each one need to implement for coordinate with his personnality or if it includes all the aspect of trading(psy,and technical exception for money management )

It's just about vacabulary definition/distinction some will argue so I'll answer that the fact here isn't about the academical definition of "edge" becuse it seem so important that no matter how good your money management is ,without an edge you'll go broke once (it'll just take more time than the average) so I need to know what's this specific edge is about not an academical description but a pragmatic .....

Thanks for reading
 
TurtleLearner said:
it seem so important that no matter how good your money management is ,without an edge you'll go broke once (it'll just take more time than the average) so I need to know what's this specific edge is about not an academical description but a pragmatic .....
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"Edge*"... save your effort and don't bother looking for it. None exist that are legal in the US markets. There are such things as "intelligence", "diligence", and "discipline" in trading. None of those are an edge.

Edge is when you have a definite advantage... like in a gunfight, the sun is at your back and in the other guy's eyes. Or take the case of Bob Munden... quick draw artist. In a gunfight he'd have the edge because he doesn't have to "clear leather"... he just pulls the handle down, the holster pivots, and he fires while still in the holster. Assuming he could hit the other guy, that would be "edge".

Genuine market edge... (1) front-running orders... illegal, (2) trading on inside info (meaning, "before it's public)... illegal.

Years ago in mutual fund timing accounts, we had sort-of an edge arbing the major world markets... US, Asia, Europe... betting on them to be "monkey see, monkey do". (1) It worked well enough that the SEC imposed regulations to stop the arbing, and (2) it stopped working for the most part before the SEC got involved. (By stopping working on its own indicates it wasn't a genuine edge at all.)
 
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TurtleLearner said:
Bonjour/Bonsoir ET , it's again your turtle learner , hope you're fine .....

So this time , my question is about edge , before made any misconception ,I'll clarify what I try to said but what's it
So I read this word edge so many time in market wizard and was a little bit confuse cause I doubt if t's just about "the trading system" that each one need to implement for coordinate with his personnality or if it includes all the aspect of trading(psy,and technical exception for money management )

It's just about vacabulary definition/distinction some will argue so I'll answer that the fact here isn't about the academical definition of "edge" becuse it seem so important that no matter how good your money management is ,without an edge you'll go broke once (it'll just take more time than the average) so I need to know what's this specific edge is about not an academical description but a pragmatic .....

Thanks for reading
More...

It is any process or data set that you can use to statistically put the odds of a favorable outcome at better than 50/50 including all fixed and variable costs. Technically, edge does not factor in risk/reward. That would be a factored in as another tool or process.
 
Robert Morse said:
It is any process or data set that you can use to statistically put the odds of a favorable outcome at better than 50/50 including all fixed and variable costs. Technically, edge does not factor in risk/reward. That would be a factored in as another tool or process.
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Personally, I don't care for that definition. Then again, we're just talking semantics.
 
Hmm...

First be more precise, edge over what and/or whom? An edge in HFT is not the same as an edge in stock picking. An edge allowing you to lose less filling an order? An edge to make more than treasuries? More than index fund? Be positive at all?

Start with the simplest edge in financial markets: going long stocks is an edge (on average), going short equity index volatility is an edge (on average) etc. These edges are known as the equity risk premium and the volatility risk premium and have existed as long as the instruments concerned have existed. On average still might mean negative results over most of a lifetime though.

Long term trend following in a wide basket of commodities is an edge (momentum factor).

Being as fast or faster than 99.99% in your chosen strategy is an edge.

For a short-term non-HFT retail speculator what could constitute an edge besides variants of the well known ones? Almost nothing really. Perhaps a deep pattern memory built over many years (full market cycle). Most people though are actually just leaning on one of the well known edges (like equity risk premium): ie they are mostly long stocks, possibly on a levered basis, in a bull market.
 
Scataphagos said:
Personally, I don't care for that definition. Then again, we're just talking semantics.
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Bob's definition of an edge is correct.

You were describing a 'hard edge' in your post which is the exploitation of some sort of inefficiency in the marketplace which guarantees a positive return. The soes bandits were executing a hard edge, for example. There also used to be a well known hard edge in the millennium dark pool, as another example.

Anyway, you get the point.
 
mbondy said:
Bob's definition of an edge is correct.

You were describing a 'hard edge' in your post which is the exploitation of some sort of inefficiency in the marketplace which guarantees a positive return. The soes bandits were executing a hard edge, for example. There also used to be a well known hard edge in the millennium dark pool, as another example.

Anyway, you get the point.
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I don't "get the [your] point" at all.... you're talking semantics. Like I said, I disagree... respectfully, of course.

And the "hard edge"... is that market vernacular or did you just make that up?
 
It is true "edge" is bandied about. In general it refers to having a statistical advantage/edge in your trading methodology or system which manifests in repeatable profitable trading.
 
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