I often see posters refering to, or requiring an "edge" to make it as a trader. Sometimes you will find a qualification of an "edge" or a generalized conceptual idea of it, but never anything worth while. Since all traders have the opportunity to see the same data, the "edge" can not be in the input. Is it in the entrepretation? or the application? If someone consistently makes money, are they assumed to have an "edge"? I am coming to the conclusion that the "edge" is just application of any number of reasonable, disiplined actions that over time result in a profitable methodlolgy. You do not buy "edge" in a bottle or by the gram. So my hypothesis on this thread is that there is no "edge", just good trading principles, that may be quite varied. If I need further enlightenment on this, please provide it. I am sure all the "edgers" will correct my misguided ideas. :eek:
Edge?
- Thread starter bmwhendrix
- Start date
Edge is simply taking advantage of the non-random nature of a market. They are quantifiable and persistent through time.
A simple example of a edge in price data is "trend". Every market I've ever checked has a trending tendency beyond random. Some more than others. Incorporating that tendency would be to simply place trades in the direction of the trend.
The best edges (largest degree of non-random behavior) are found external from price data, however. Something as simple as observing money flows into or out of mutual funds several days prior to price moves has been a exploitable edge for myself.
Some people believe edge is nothing more than positive expectancy in a trading strategy. While this could be the case, you should satisfy yourself that the model captures persistent, and non-random opportunities. Otherwise the model will go under when the short-term "fitted" data reverts to it's more random nature.
A simple example of a edge in price data is "trend". Every market I've ever checked has a trending tendency beyond random. Some more than others. Incorporating that tendency would be to simply place trades in the direction of the trend.
The best edges (largest degree of non-random behavior) are found external from price data, however. Something as simple as observing money flows into or out of mutual funds several days prior to price moves has been a exploitable edge for myself.
Some people believe edge is nothing more than positive expectancy in a trading strategy. While this could be the case, you should satisfy yourself that the model captures persistent, and non-random opportunities. Otherwise the model will go under when the short-term "fitted" data reverts to it's more random nature.
As far as price action data is concerned, you are correct, it is how the "output" is "viewed". However, price action edge is not the only edge one can have in trading.
Yes, you can assume they have an edge, or number or edge(s) working for them, and they are both in the interpretation and the application.
Very close, actually ... "application of any number of reasonable, disiplined actions that over time result in a profitable methodlolgy" is what you do when trading your edge.
There most definitely are edge(s) in trading, and there are good trading principles, that may be quite varied. The two may be used together or seperate when trading, depending on what they mean to individual trader.
Looks like we're off to a good start.
Good trading,
JJ
There's been many in-depth discussions about this in the past here at ET.
http://www.elitetrader.com/vb/search.php?s=
With that said, an edge can be anything and any trader that think it only involves only a pattern signal has probably not traded with real money on a consistent basis over many consecutive years.
More importantly, if there's a routine or consistent approach to a profitable trader approach to the markets...
I would say that trader has an edge and that routine or consistent approach is needed to maintain the consistent profits.
Thus, any trader that approaches the markets in that there are other edges besides just the pattern signal is more likely to exploit the markets in comparison to someone that tries to find an edge only in a pattern signal.
Simply, there's much more to technical analysis than the pattern signal...
Something backtesters of technical analysis will always have problems in understanding because they mainly concentrate on the pattern signal and not the other aspects of technical analysis that goes beyond the pattern signal.
Mark
"Edge" is another of those vaguely defined words that traders use. In my opinion other examples of vaguely defined trading terms are trend, trend line, strength, weakness, up, down, quiet, top, bottom, looks toppy, pattern, chart pattern, triangle, flag, channel, and climax. I suspect attempts to define a standard speculative terminology fail. Anyone may appear at any time with their own trading terms and may or may not make sense.
I define trading terms mathematically when I design a trading system.
I suppose if I am winning then I have an edge at that moment. If I lose then I don't have an edge. Maybe the edge has me.
<img src=http://images.usatoday.com/life/_photos/2006/02/02/edge-u2.jpg \img>
The Edge.
I define trading terms mathematically when I design a trading system.
I suppose if I am winning then I have an edge at that moment. If I lose then I don't have an edge. Maybe the edge has me.
<img src=http://images.usatoday.com/life/_photos/2006/02/02/edge-u2.jpg \img>
The Edge.
If you buy "edge", you may receive an additional 33% ROI.
Get thee some testosterone.
