The Meaning of A Trading Edge

Quote from tradingjournals:

Thought to add that I am trying to contribute like others. I have being exchanging with a 73 year old person who seems to be very interested in reading what others thing. You may catch the discussion at this link:
http://www.elitetrader.com/vb/showthread.php?s=&threadid=49586&perpage=6&pagenumber=2321

As for whether I am serious or a troll, either way you judge is fine with me. By the way, I do not know what a troll is, but I am guessing that it is not something good. You have the right to your opinion.
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Troll (Internet)

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"Do not feed the trolls" and its abbreviation "DNFTT" redirect here. For the Wikimedia essay, see "What is a troll?".
In Internet slang, a troll is someone who posts inflammatory, extraneous, or off-topic messages in an online community, such as an online discussion forum, chat room, or blog, with the primary intent of provoking other users into a desired emotional response[1] or of otherwise disrupting normal on-topic discussion.[2] In addition to the offending poster, the noun troll can also refer to the provocative message itself, as in "that was an excellent troll you posted". While the term troll and its associated action trolling are primarily associated with Internet discourse, media attention in recent years has made such labels highly subjective, with trolling being used to describe intentionally provocative actions outside of an online context. For example, recent media accounts have used the term troll to describe "a person who defaces internet tribute sites with the aim of causing grief to families."[3][4]
 
you sound like the typical middle office/ product control running boy of most sell-side firms. How is a trader to generate required returns if he is to limit risk "from every angle"??? Could you consider the possibility that measured risk taking is actually encouraged by most trading desk heads?

To get back to the OP: I believe an edge is a condition in the market that can be exploited for profit on a repetitive basis and whose outcome and risk can be measured and clearly defined. An edge can be pure trading skills in terms of risk management and may have nothing to do with price patterns whatsoever. Traders who produce almost every single year over 10-15 year clearly possess and edge that they probably are well are of and do not like to share with others....


Quote from Arjun1:

No such thing as edge.

Risk is the only reality in the markets.

You job as a trader is to minimize/limit/avoid/contain risk from every angle.
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Quote from tradingjournals:

You mean place/state/condition that leads to dollars being dropped on the street, but which cannot be seen by everyone?

What is long enough, and how to make sure it is still long enough?
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Long enough is enough time to form a hypothisis about it. Test your hypothisis. Prove it's statistically valid and trade it before it disappears.

I was taking to a currency trader recently who trades 8 automated systems across all major currency pairs. He claims his systems have an average lifespan of 9 months. So as the profit of each system begins to diminish, he removes the worst performing system and adds a better performing system. In his case, 9 months is the time frame it takes for the other participants to recognise the anomaly and arb it out completely.

As markets evolve with time, every edge is eventually arbed out as more and more people try to profit from it. This behaviour causes new conditions to arise, that lead to possibilities for new edges to emerge.

400 trades is a statistically valid testing size. The shorter the time frame in which those trades occured, the more statistically valid they are likely to be.
 
quote:"To get back to the OP: I believe an edge is a condition in the market that can be exploited for profit on a repetitive basis and whose outcome and risk can be measured and clearly defined. An edge can be pure trading skills in terms of risk management and may have nothing to do with price patterns whatsoever. Traders who produce almost every single year over 10-15 year clearly possess and edge that they probably are well are of and do not like to share with others...."



Quote from Arjun1:

No such thing as edge.

Risk is the only reality in the markets.

You job as a trader is to minimize/limit/avoid/contain risk from every angle."


I know (from different resources) many people who profit handsomely every SINGLE WEEK (not month, not year). These people definitely have developed an edge in trading.
 
Quote from tradingjournals:

One cannot be serious all the time, and it was an answer similar to an answer I received in one of the threads I started about traing assets. The answer was not meant to offend anyone, but rather to make people read unusual answers. I have no objection that it gets removed. I hope that my other answers were different. As for the threads, I believe that asking core questions can be of help in pushing readers to extract and share the main juice of their thinking.
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"One cannot be serious all the time." Fair enough. But being humorous is one thing, making sexually explicit (or in some cases implicit) statements is quite another.

Yes unfortunately there is no short supply of people who are vulgar, obscene and distasteful in these public forums. But just because somebody did it to me would not make me degrade myself to their level to behave the ways they do.

I tell you what prompted to my question. May it change your future posting styles. Or may it not. I don't really care. When I first saw your threads, you impressed me as an inquisitive journalist who is seeking for the meaning of many different trading concepts. But your two-word post made on 8/7/2010 had completedly changed my impression of your reputation from positive to negative. People are judged not by who they say they are but by how they behave.

As for the topics you have started, most of what I have seen is you started the topic but that would be the last post from you. No follow-up. No conclusion. All open ended. Just makes me wonder for whom the discussions would benefit.
 
Bolimomo:

I did not know there was a positive image out there, and I thank you for your words, and I certainly did not mean to offend anybody or make any implicit statement. The word mentioned refers to a human organ, and I believe there is nothing vulgar in the word itself since without it we would not be complete as humans, and as I did not mean anything implicit with it. I would however understand your perspective that you do not wish to read such word in this forum. Again, I have no objection at all if the post gets removed.

As for not commenting there are two reasons: (1) I did not want to comment at the beginning of a thread so that it develops on its own and so that I do not appear as the owner of the thread so to speak; (2) your point that I should conclude it is a good one, and it has been the original plan , and I have been planning to do it, but somehow laziness/forgetfulness/otherness get in the way, and I have not done it. The intention is there, but the completion is not. It is one of the weaknesses.

I retain from your inputs that you are a thoughtful individual with a keen interest in spending a productive time, and you are certainly right. I look forward to reading your posts. You have gotten my attention, and I have not noticed you before this evening. It is a good thing that people like yourself are around---I had the impression that not everyone in this forum is always here to learn. Your reactions has pushed me to reconsider this impression, and I thank you for that.
 
Cross Instrument Options Arbitrage Example:

Your edge is a lower risk covered position scalping premiums between the two correlated instruments.

Trigger the trade when the premium differential generates sufficient profits covering the transaction costs and any price differential of the underlying instruments.


SPY / ES Options

Current
SPY Bid/Ask: 111.39 / 111.45
ES 1114.00 /1114.25

SPY 112 Calls Bid /Ask 6.95/7.00
ES 1120 Calls Bid/Ask 9.00 / 9.50

5 SPY's = 1 ES

Buy 5 SPY 112 Calls = $350
Sell 1 ES 1120 Call = $450

Gross Profit = $100
 
Quote from Bolimomo:

"One cannot be serious all the time." Fair enough. But being humorous is one thing, making sexually explicit (or in some cases implicit) statements is quite another.

Yes unfortunately there is no short supply of people who are vulgar, obscene and distasteful in these public forums. But just because somebody did it to me would not make me degrade myself to their level to behave the ways they do.

I tell you what prompted to my question. May it change your future posting styles. Or may it not. I don't really care. When I first saw your threads, you impressed me as an inquisitive journalist who is seeking for the meaning of many different trading concepts. But your two-word post made on 8/7/2010 had completedly changed my impression of your reputation from positive to negative. People are judged not by who they say they are but by how they behave.

As for the topics you have started, most of what I have seen is you started the topic but that would be the last post from you. No follow-up. No conclusion. All open ended. Just makes me wonder for whom the discussions would benefit.
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Give it a rest, bolimomo. You're trying to set this nice op up so you can go snitch in the feedback forum to get his threads deleted or him expelled.
 
Quote from spindr0:

I like that definition of an edge. I'd add that one's skills enhance the result.

I found a "trading edge" during the GFC of '08 and '09 which produced outsized returns for 20 months. But with all of the bail outs, stimulus and printed money, it ended. I guess my 15 minutes of fame is over :)

Now if Greece would only slide financially into the Aegean... :D
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I had that, one of my systems (call it an edge if you want) stopped working after the 08 crisis. I guess I was frontrunning the Bears and Lehmans :D
 
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