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If edge is hard to get, why traders keep trading?
- Thread starter OddTrader
- Start date
Please, do not separate edge, risk and money management and discipline. They are all-inclusive. Only very novice traders make this type of mistake.
I repeat here what I posted on another thread:
Trading profitably is all about having an edge.
The term "edge" includes:
(1) A way of timing entries and exits so that the resulting expectancy is a positive number of sufficient magnitude
(2) Proper position sizing so that the risk of ruin is minimized
(3) Proper capitalization so that an effective risk and money management method can be put to work
(4) Discipline and emotional stability
95% of traders lack one or more of the above. Most lack (3) and (4). Nobody will disclose his edge unless he is crazy. So forget about getitng information about (1) anywhere.
....
I repeat here what I posted on another thread:
Trading profitably is all about having an edge.
The term "edge" includes:
(1) A way of timing entries and exits so that the resulting expectancy is a positive number of sufficient magnitude
(2) Proper position sizing so that the risk of ruin is minimized
(3) Proper capitalization so that an effective risk and money management method can be put to work
(4) Discipline and emotional stability
95% of traders lack one or more of the above. Most lack (3) and (4). Nobody will disclose his edge unless he is crazy. So forget about getitng information about (1) anywhere.
....
What do you mean by saying "the resulting expectancy is a positive number of sufficient magnitude".
the only way to achieve positive expectancy is modeling the market biases and long term structure.
TA or any other similar retail-based mystical predictive approaches will never provide an edge because <b>the market is NOT predictable.</b>
among other, INFLATION is one of the most powerful and widely available biases that can used by any trader to achieve positive expectancy.
so, an edge is not difficult to find but understanding what could be an edge and how to to use it is what seems to blow most trader's minds.
TA or any other similar retail-based mystical predictive approaches will never provide an edge because <b>the market is NOT predictable.</b>
among other, INFLATION is one of the most powerful and widely available biases that can used by any trader to achieve positive expectancy.
so, an edge is not difficult to find but understanding what could be an edge and how to to use it is what seems to blow most trader's minds.
Quote from ProfLogic:
Interesting comments.
I've been playing the state lotto for 14 years and haven't won once! The odds against that are even more than winning yet it happened. So under your "school of thought" one should hang out till you win big. Now that is simply silly.
My father played professional baseball and then coached in the semi-pros and local leagues for years after and always had winning teams. His offensive philosophy was that all batters simply concentrated on "getting on base and advancing" and the rest would take care of itself. Defensively he taught his players to be simply focused and tight. Be as mistake free as possible. In all of his years of coaching he never had a loosing season and won division and state championships with his teams regularly.
The common factor here to trading is to concentrate on consistently pulling profits from the markets and the home runs will happen occasionally. They are the cake and should never be the main course. Stop trying to "put it out of the park" on each swing. When you "try too hard, you WILL fail".
Luck should never be a staple to your trading.
Excellent post, thank you.
Quote from ProfLogic:
Absolutely correct but it is methodical.
the understanding of this is an edge.
Why is it methodical?
How is it methodical?
Is it methodical at doing what?
This goes back to one of my earlier post about the understanding of the auction market.
If you read the above and you feel clueless... you are not alone. more than 95% of the ETers will have no clue either.
So don't cry.
More word games from the professor. I wouldn't pay much attention to the illogical, logical method.
the flat earth society puts forth compelling literature defending their beliefs. the edge claimed by the prof falls into this same tricky verbage and subtrefuge techniques.
come on Prof, post some calls or trades before the fact....
regards, surf
http://en.wikipedia.org/wiki/Flat_Earth_Society
the flat earth society puts forth compelling literature defending their beliefs. the edge claimed by the prof falls into this same tricky verbage and subtrefuge techniques.
come on Prof, post some calls or trades before the fact....
regards, surf
http://en.wikipedia.org/wiki/Flat_Earth_Society
Quantitative traders know what their edge is through testing historical data. They know which patterns or programs are showing promise. Of course they don't know if they have a real edge until they start making consistent money.
A discretionary trader usually does not know what their edge is because it is a combination of the mind, the gut and the instinct reacting to patterns and other information. They only know they have an edge if they are making consistent money. The TA they use cannot be measured because out of 10 similar patterns, they may only take two. And their bet size may vary or their stop may vary depending on the trade - traditional money management is dynamic.
For quants their edge could disappear overnight if the market changes. All that work and money down the drain. The rigidity of their systems is their weakness as it is hard to tell the difference between a draw down and the end of your edge.
Discretionary traders adapt to changing markets better, but their weakness is maintaining a peak mental state that is not disrupted by lack of focus, lack of confidence, over confidence, emotions etc., which can discombobulate one's mental machine.
The bottom line is, if the quant method is your game you can find an edge through testing, but you will only know if your edge is real when you are making money. For a discretionary trader, you will only know if you have an edge if you are making money. If you are discretionary, don't waste time worrying about what your edge is - just make money or die trying.
A discretionary trader usually does not know what their edge is because it is a combination of the mind, the gut and the instinct reacting to patterns and other information. They only know they have an edge if they are making consistent money. The TA they use cannot be measured because out of 10 similar patterns, they may only take two. And their bet size may vary or their stop may vary depending on the trade - traditional money management is dynamic.
For quants their edge could disappear overnight if the market changes. All that work and money down the drain. The rigidity of their systems is their weakness as it is hard to tell the difference between a draw down and the end of your edge.
Discretionary traders adapt to changing markets better, but their weakness is maintaining a peak mental state that is not disrupted by lack of focus, lack of confidence, over confidence, emotions etc., which can discombobulate one's mental machine.
The bottom line is, if the quant method is your game you can find an edge through testing, but you will only know if your edge is real when you are making money. For a discretionary trader, you will only know if you have an edge if you are making money. If you are discretionary, don't waste time worrying about what your edge is - just make money or die trying.