Identifying an edge

Quote from wrbtrader:

I've told you what is a trading plan along with specifically naming key components of that trading plan. Yet, if you're looking for something else or more info...that's what I'm confused about what you seek.

If that doesn't make sense to YOU...that's my point to the OP in that the OP is missing something from his trading plan that confusing him about when to execute a trade. :cool:

Yet, we don't know the OP nor anything personal about the OP nor anything about the variables involved currently in the OP's trading plan. Those realities will make this thread short lived via the fact the OP will not find his/her own edge via what others say how they found their own edge.

Mark
More...

May be i shouldn`t ask about 'trading plan' in this thread,or may be it is right in time fo Erol to know asap what the 'tradin plan' is, cause there is none.

That thing could only prevent you from dealing with the system.
 
thanks gentlemen for the feedback...

I have entry and exit points in terms of price and I'm fairly disconnected emotionally for the trade so I'm very good at sticking to my plan. I risk a small portion of my bankroll. I suppose I'm wondering how you've identified that strategy that has positive expected value for you.


Or does this even exist?
 
Quote from erol:

thanks gentlemen for the feedback...

I suppose I'm wondering how you've identified that strategy that has positive expected value for you.


Or does this even exist?
More...

Simple answer...real trading results. Thus, you won't know for sure in the beginning that you have an edge assuming you're not talking about a mechanical or automatic trading system.

Yet, you'll know when that strategy is working well inside your trading plan without any contradictions and your trading results are consistently profitable. Therefore, that identification will be hindsight after you feel satisfied that it's consistent (whatever that definition of consistent means to you)...assuming you're not asking this question in reference to a mechanical or automatic trading system.

Mark
 
Quote from erol:

thanks gentlemen for the feedback...

I have entry and exit points in terms of price and I'm fairly disconnected emotionally for the trade so I'm very good at sticking to my plan. I risk a small portion of my bankroll. I suppose I'm wondering how you've identified that strategy that has positive expected value for you.


Or does this even exist?
More...

Did you ever play videogames?Did you ever walk through all the stages of the game?This one is the same shite!:eek:
 
Quote from erol:

Hello,


I've accumulated a lot of knowledge on how things work, and what to do when certain conditions are in my favour, however I suppose the challenge is knowing when to execute a trade.

I was wondering how you successful traders with an "identifiable edge" found your edge.

Is it a matter of data mining? Identifying patterns and back-testing to check if the validity of your (proposed) strategy?

I guess I'm just asking for a map, or a starting point.
More...


Paitience. Waiting for your mark.

Seasonality. Probabilities increase or diminish.

Appropriate position size. Enough to matter but not enough to hurt you. Two overlapping spheres with a sweet spot.

Unconventional tools. Relative strength for example. Creating a synthetic price that reveals pure price movement.

Quantifying overhead resistance.

Cutting losses with emotional detachment is the hallmark of a good trader.

Exits are taxable events. That's where the money is made (or lost), not entries.
 
Quote from erol:

I was wondering how you successful traders with an "identifiable edge" found your edge.

Is it a matter of data mining? Identifying patterns and back-testing to check if the validity of your (proposed) strategy?
More...

Identifying an edge is best done mechanically nowadays not because this is the way to do it but because this is how others do it. If you find the edge before them you win. If they do, you lose.

Backtesting can only check the historical validity of a strategy. You have to be very careful here. It tells you nothing about the future performance. You need to perform sufficient out of sample testing to increase the chances of future success.

Check out this older post for some tools that discover edges mechanically just to get an idea what they do, not necessarily an endorsement:

http://www.elitetrader.com/vb/showthread.php?s=&postid=2968698#post2968698
 
Quote from erol:

Hello,


I've accumulated a lot of knowledge on how things work, and what to do when certain conditions are in my favour, however I suppose the challenge is knowing when to execute a trade.

I was wondering how you successful traders with an "identifiable edge" found your edge.

Is it a matter of data mining? Identifying patterns and back-testing to check if the validity of your (proposed) strategy?

I guess I'm just asking for a map, or a starting point.
More...

While I am not going to tell you how to get an edge, here is a very simple, fool proof way of determining whether you have one.

Just plot the liquidation value of your account versus time in days, one point per day. Connect the dots and then estimate the best fit, straight line through all the points. If that line slopes up you have an edge. The greater its slope, assuming the slope is positive, the greater your edge.

As far as where to start, there are many useful threads here. You have very much to learn. Here are some of the good traders that have posted on ET, in no particular order. Geez, Pekelo, Nodoji, Volente, and quite a few others. Learn from them. Don't bother with anything posted by a fellow known as Jack Hershey.
 
Everyone on this forum throws that term around yet no one can define it or quantify theirs.

If you're making money then you probably* have an edge.

I guess an edge could be something like "I have this awesome indicator that always gives me winning signals." But it could also be "I have an enormous account that allows me to average down forever with ES contracts without blowing my account." That's also an edge, albeit not necessarily a strategic one.




*but not if it's just luck
 
Quote from piezoe:

While I am not going to tell you how to get an edge, here is a very simple, fool proof way of determining whether you have one.

Just plot the liquidation value of your account versus time in days, one point per day. Connect the dots and then estimate the best fit, straight line through all the points. If that line slopes up you have an edge. The greater its slope, assuming the slope is positive, the greater your edge.
More...

This 'method' doesn't determine that at all. I just need one example to disprove it. I'm sure LTCM's equity was rising every day for literally years before they collapsed.
 
You must log in or register to reply here.
Back
Top