Quote from illiquid:
Look it's pretty simple, don't over-think things. Just know your market inside and out. Know all the reasons why prices would move, know the players, the time-frames, the data points. Know where you fit in within all that. Know enough to deserve to make money -- does that make sense? Think you can just walk into a ring with a pro boxer and take a few rounds from him without ever having taken a punch in your life? That's pretty much the analogy for those starting out.
I see all these threads from very intelligent people who are taking their first stabs at this business, they look at the market from UP THERE, rather than DOWN HERE where all the action takes place. Are you planning on making money from trading (ie, buying lower/selling higher), or are you going to write a book? If it's trading, then your primary focus by far should be PRICE, cuz that's the one and only place where your fingers will ever actually make contact with the market. Where your decision-making impacts both your account and the market itself. Why bother starting anywhere else?
The immediacy of trading just gets completely lost in all the theoretical mumbo-jumbo of what "should" work. Efficiency to a trader is pretty much bs; what matters more is how much inefficiency your account can handle before you become just another agent of said inefficiency getting blown out of your positions. When you look at prices on the screen, think about what it is exactly that is making these prices move. Where does that impetus come from? Those are the questions that should be asked.
"Edges" boil down to a simple formula: time and effort. As mentioned earlier, eventually, you'll just know it when you see it. It's the recognition of an opportunity, for whatever reason, given the "wisdom" you've accumulated from your past experience. That's pretty much the whole ball of wax. BUT -- you need to recognize that face of opportunity before the majority acts on it. You are competing with other traders who have done nothing but watch prices move, day in, day out, for YEARS; what are you going to bring to the table that they don't know about? What is it that will get you to pull the trigger faster than they will (and in the right direction)? Your competition knows what you are going to do before you even realize you're thinking about doing it. An "efficient" market just means there are more f*ckers out to get you and each other, and therefore by the time you are pulling the trigger to enter a trade most others are already on their way out faster than you can say zerosum.
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