Ron, I think you are confusing some terms here and to be honest, I think most people do. Edge is not the same thing as being profitable or having a profitable return. I've often joked on ET if that was the case then buying a CD from your local bank could be construed as having edge. Or hell even having a job. After all you "expect" to get a positive stream of cash flows from your employer right?
Edge is something entirely different. First let me start off by giving a general definition between using a "technical" approach vs a "quantitative" approach. Technical traders, those who look at patterns or moving averages or doji's are looking to "prove" something works. They do things like "backtest" their pattern and if it yields a positive return you might hear them say they have edge or something like that. But the genesis of their approach is trying to convince themselves (or others) that their indicator or strategy works.
The quantitative approach is the opposite. Generally speaking, quantitative math or analysis is actually trying to "disprove" or prove that something does NOT work. Think about to college stats and doing hypothesis testing. You are trying to reject the null. Why would you want to disprove your work? To see if it's robust! I think you used that word. The idea is to qualify your results to determine what role luck possibly played in the outcome. This is where the "expected value" comes in along with one of my favorite words "variance". The idea with quantitative analysis is NOT to solve for expected value. That has no meaning because we have no idea if that expected value is random. So the idea here is to expose your data to rigid "quantitative" analysis and try as hard as you can to prove you are wrong. This in contrast to "technical" analysis where you are working diligently to prove you are "right".
Let me make note here that simply proving you are not wrong does not mean you have an edge or that you will even be profitable. The example often used in school is a jury trial. You cannot prove someone is innocent. You can only prove that they are not guilty based on the evidence presented. OJ Simpson for example was determined to be "NOT" guilty. That does NOT mean he was innocent. That's how data analysis works. It's impossible to prove with absolute certainty that something does work but you certainly can prove it doesn't. Or you can prove that it's likely your results are due in large part to the variance of the data. In other words, dumb luck. And as I'm sure you know, there is a mighty fine living to be made convincing people you have something when a high degree of variance is involved.
So expected value alone does not reveal anything to you. Neither does your avg winner or avg loser on a backtest. This is often why people who brag about technical analysis get looked down on because their approach is not only unscientific, but it's seriously prone to bias. You are "trying" to make the data work. That is your stated goal. You often "see" what you want to see. It's why you can have two analysts on CNBC looking at the same chart and they are both technicians and one is very bearish and the other is very bullish looking at the same chart. Both are seeing what they want to.
I'm not trying to advocate for one approach over the other. I have my own theories on this stuff. But to be fair, it's usually "technical" guys that misuse the concept of expected value. They run a back test on trade station or meta trader and it spits out a positive expected value using their moving avg cross over technique and they jump for joy that they found gold. They basically found exactly what they wanted to find. Not a very robust way to go about things I would say.
So to sum up, the prudent way to test things would be to try to prove something does not work. There are many techniques and many variations. Just keep running through the meat grinder as if your goal in life is to expose yourself as a fraud. After some time, while you may never prove you have something that absolutely works, you will find at the very least, that it's highly likely your results did not come from mere chance. There is some other variable driving your results. The fun part comes when you find that variable and begin to optimize it. Sorry for the long explanation.
