edge...

[jack hershey]

Quote from bighog:

Well i think Jack Hershey is missing the point about where and what an edge is in a game of probability.

Pattern recognition is not an edge, pattern recognition is more understanding how the mkt is TALKING to a trader. Pattern recognition is more about what to do WITH the BREAKOUT of a pattern. In other words: Knowing the odds of what the mkt will do next by understanding the "TALK" of the mkt is where a trader will play the odds from the BREAKOUT of a pattern, a levels support/resist etc.

I think most traders use the term "EDGE" as what works for the specific trader.

Jack seems to miss the reasons for an entry or exit in the first place. we trade when we feel the odds are in our favor. What else do we have?

I have an edge: my edge is avoiding the mistakes that i had to deal with in understanding why i took trades in the first place. Now i know why i take trades, i know the intuition says you have seen this breakout before, go for it dude, go for it. place a stop always, in a game of probabilityb losses are to be dealt with.

Thank you for your comments.

They are right on the mark for what edge traders believe and especially what pattern traders believe, in particular, for patterns that end with BO's.

Your comment "What else do we have?", I regard as not the conclusion that a person like the OP would draw but the comment that would be the beginning of the rest of his life to leave the edge concept behind and to take it off the table once and for all.

By clearing off the desk and erasing the slate, then a person can look around and say with enthusiasum:

"What ELSE do we have !!!!"

A potential trader has the potential to look at the market and think.

All of that is OT in this thread.

Personally, I have no concept of what the odds are when I am trading. Is there a game of probability going on? It is simply not anything that I am concerned about. I do very few entries and exits, either. Why would I be entering and exiting?

My attention is given to optimizing being effective and efficient as I do what the market tells me to do. Money is offered to me all day long; I take money out of the market all day long.

 

[in56]

Quote from lindq:

What specifically gives you confidence that you can outwit 10,000 other traders, and consistently pull a profit from the markets?

If you don't have the answer, then you don't have an edge.

I don't have the answer, but I'm making money... I just don't know if "the edge" is knowing something nobody else knows or doing the same thing everybody else does but doing it BETTER...

 

[jsmooth]

Quote from in56:

I don't have the answer, but I'm making money... I just don't know if "the edge" is knowing something nobody else knows or doing the same thing everybody else does but doing it BETTER...

My edge is very simple....because we are in a zero sum market (in order for me to make money, someone else has to lose)...so, all my trades need to fade the losing trader.....meaning, i'll be willing to take a trade when no one else wants it. So i will then use technical analysis and charts to estimate were the loser is positioned in the market, then try to fade him.

I know this is an edge because of the simple fact that 90% of traders lose, and i assume that technical analysis only works 50% of the time (IF the trader using the technical system is 100% disciplined...which i assume he isn't). This, along with a rock solid money management is my edge.

This simple concept was taught to me by a local at the CBOT. If you want a trading example and my thought process just reply and i'll post one.

 

[cturner]

OK I'll bite, post an example and your thought process.

 

[jsmooth]

Quote from cturner:

OK I'll bite, post an example and your thought process.

Well I was a buyer of Gold last week when it dropped close to $20 (Jan 5th) – my average cost was just below 610 (via the YG – cbot mini gold contract). The week prior to that I was a gold bull and a US dollar bear. I was assuming that fundamentally the euro and pound would continue to be strong going into 2007 and I was looking for a USD rally to sell into. I then wanted to play that euro/pound move via gold because of some other fundamental reasons. At that time gold was trading between $630 – 640. If you look at a daily chart gold is basically in a huge downtrend from Dec to May and HEAVY resistance at the $650 level. I was then assuming that in order for gold to break 650, some fundamental news would need to push it past that. I was then assuming that a strong euro or pound would be that fundamental news to drive the price above 650. When looking at the euro & pound charts you will also see that those currencies have yet to test their breakout prices (around 1.2900 – euro). That test of 1.2900 would be a significant technical signal for technical traders to enter the market long. I’m assuming that a lot of technical traders will enter the market at that test of the breakout, plus fundamental traders will continue to be usd bears and also enter the market during the euro or pound pullback. So, since I’m trading this via the gold market I want to be a buyer, but not at the $630 – 640 level – this price is overvalued and I could consider myself to be a EARLY LONG. So, when looking at the Gold chart I’m also assuming that all the gold buyers from 12/17 to 01/02 were EARLY LONGS trying to enter the market and also technical traders buying gold simple because it bounced off a technical trend line (615 level).

Because all the buyers from 615 to 640 are on the wrong side of the order flow I can consider them to be losing traders who have to liquidate…..and technical traders would put their stop just below 615 (below the trendline that gave them the buy signals). And I know they are losing traders because they are too early to enter the market. The resistance at 650 is too strong, some fundamental news will have to push it above that level – like a strong euro or pound.

A pro trader once told me, “professional traders dont buy highs (or sell lows) – they buy (sell) pullbacks and retracements before those highs and lows are made”. So in order for the professional trader to enter the market they need a pullback. They’ll be a buyer when all the losers are getting stopped out. So I’m then assuming that all the buyers that entered the market from 615 – 640 have placed their stops below 615 – below the trend line or at a level that will give them technical sell signals. I then want to be a buyer at those levels were all the stops are getting taken out – from 605 – 612. I also consider the assumption that 612.50 is a 50% trend retracement and new technical buyers will buy that dip/retracement, and also the fact that 600 will be a psychological support for a handful of other new buyers. So I’m a buyer between 605 – 612. I basically took the contracts from the early buyers around 615 – 640 who financially couldn’t hold their positions due to the drawdown in their account/stops. And entered the market while the new technical (50% fib buyers) entered the market. I will then be looking to sell my position when we get some technical confirmation of a bounce. I’ll again be fading the “losing” technical trader who is again late to enter the market – probably around 620.

This strategy was taught to me by a grains trader at the cbot. I would watch him trade and I would always see corn tanking and he would always be willing to buy at that low. I always thought he was trying to catch a “falling knife” and pick the low of the day, but he told me. “I’m not buying the low, I’m just fading the loser. The loser is liquidating out of panic and frustration, if you fade that trade, 9 times out of 10 you’ll be entering a winner….and if your wrong, you’ll have a real tight stop target.”

 

[bighog]

Jack, jack, come on man. Breakout from support/resist levels, patterns etc are what this is all about. Futures, stocks etc daytraded is about playing the odds, it is a numbers game.

Not trying to rattle your cage but what is your objective? I certainly hope there is more motives than just debunking some solid technical ideas with hocus pocus and "just take what the mkt gives you".

Please refresh me with some ideas that do not include playing the odds in a game of probability. Thank You

PS....what the hell is op, ot etc, speak english man.


PSS.............and as an afterthought, i am not a noise trader so give example besides trading within a channel. Range trading has been expressed by me in the past. Are you trying to gain a following to start a website? Something is up besides good solid, viable trading. Trading noise is not cool. thks

 

[bighog]

jsmooth

that was quite an example on trading retraces. ....

in my world, i agree, but i am kinder to the other traders in the game. why say fade the newbies? ...

 

[bighog]

jsmooth

Thought you might like a review of todays ES retraces during a ONE-WAY day.

When the pit opened we were at 1425.00 we went up and the bulls were in control, we preceded up to 1435. 50 without any significant retrace. the worst retrace was from 1432.00 down to 1429.50, a smallish retrace that told you the bulls were in charge. At worst a trader trying to get on board if he/she missed th initial move was in reality "chasing a run". Ok, we bounced around the top area and were up 10 handles..............A CAUTION SIGN. At +10 handles and no significant retrace yet, get prepared for one, take the profits.


In your heart you knew the mkt was due for a "NORMAL" 5 handle retrace from a 10 handle run (50% retrace). well indeed we got that retrace plus some more, again the mkt was sending you clues, this time the mkt was telling you to be careful because we retraced down to 1429.25 . 1 tick lower than the previous retrace. once that held you were still in the bulls camp after getting nervous to say the least. (notice how it was wise to take profits when up 10 handles, the trade in ES just loves to use 5 handle increments to take actions. (the first 5 handle upmove from 1425 to 1439 was followed with that 2 1/3 handle retrace.

Clues, clues the mkt gives you clues as it talks to you. Ok?

Then we retraced from the days high at 1435.75 down to 1429.25, that was 1 tick below the previous retrace low. once we hooked up from that support (support from previous retrace low), the bulls were now more confident that the retrace low was in and indeed we were in a continuation rather than a reversal. Many tried to get short, they got short ok, shorter in the wallet after the mkt told you the retrace was over and now we were going back up.

Ok, the retrace was more than 50%, that was another word from the mkt that a new high was not to be. Indeed it went up to 1434.50 and proceeded to retrace again down to that 1430 area again. Game was over for the day.

LISTEN to the mkt as it talks to you for the moves, when you trade noise you always will miss what the mkts real motives are.

How many of you guys were ever accused by the Lady of the house that you did not or should have listened to what she was saying?...

 

[traderdragon2]

Making money is not evidence of having an edge.

I can backtest a trading system that simply flips 100 coins a year to pick stocks, and I will show you some runs with amazing results.

But it was simply luck. Someone has to land on the end of the lucky bell curve.

If you cant answer the previous question, then you have no idea if you actually have an edge, or are one of the lucky guys who is on the end of the bell curve.

End of the bell curve guys blow up given enough time.

Quote from in56:

I don't have the answer, but I'm making money... I just don't know if "the edge" is knowing something nobody else knows or doing the same thing everybody else does but doing it BETTER...

 

[Spectra]

You've found the grail!!!