The Theory of Edge Diminishing
- Thread starter .sigma
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Say you figured out a way to determine price levels where you know there will be a good chance of either resting orders or algos will kick in to buy or sell. The more people figure out this information the more competition there is to get filled at as close a price as you can to your stop point.
I'd actually maintain that it's only actually an "edge" if it indeed would be arb'd out of existence if done at scale (which as pointed out in finance means number of dollars not number of participants). If it can't be arb'd away it's not an edge, it's apophenia and you're deluding yourself.
One of my strategies in the past involved trading a class of illiquid equities. I analyzed its performance a few weeks after going live. The real results were nothing like the backtesting. It ended up that I moved those markets by trading too big. So in effect I arbed out my own edge.
On a side note, with the new commission free trading I plan to revive that strat by trading tiny positions across a huge breadth of tickers.
On a side note, with the new commission free trading I plan to revive that strat by trading tiny positions across a huge breadth of tickers.
can you automate trading via free-commission broker? I can not find such broker.
My commission free broker is Fidelity which does not offer any automation or API trading.
You might want to look into Schwab which is commission free and acquired TDAmeritrade. Assuming Schwab does not scrap the ThinkOrSwim platform, it comes with auto-trading and scripting capabilities.
I've never used ETrade but they are now zero commission and have API based trading (Python and Java).
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I've read a lot on forums about how traders don't tell their "edge" to the public because they are fearful if by doing so, this current method that feeds their account would suddenly disappear, or maybe gradually, becoming fully arb'ed..
Is this shit even real? Lets say you tell this forum your exact money maker.. lets say a few thousand people start using your method (highly unlikely), would you really see your edge disappear? These strangers would have to trade exactly like you to accomplish this, and of course the trading will differ no matter how similar the set up.
IDK about you but I'm not buying this. Thoughts?
Discuss
Richard Dennis has talked about this a bit over the years.
“I don’t think trading strategies are as vulnerable to not working if people know about them, as most traders believe. If what you are doing is right, it will work even if people have a general idea about it. I always say you could publish rules in a newspaper and no one would follow them. The key is consistency and discipline.”
From: https://www.turtletrader.com/trader-dennis/
and
"I always say that you could publish my trading rules in the newspaper and no one would follow them. The key is consistency and discipline. Almost anyone can make up a list of rules that are 80% as good as what we taught our people. What they couldn't do is give them the confidence to stick to those rules even when things are going bad."
- Richard Dennis
Attributed to: Market Wizards by Jack Schwager
An edge is also called 'competitive advantage.'
a pro has competitive advantage as he has more information that is not available to non-pros or lower commissions. or technology like automated software etc.
or experience and training or is an 'edge'
market makers or insiders have an edge, they control the stock price. via owning a lot of stock.
a pro has competitive advantage as he has more information that is not available to non-pros or lower commissions. or technology like automated software etc.
or experience and training or is an 'edge'
market makers or insiders have an edge, they control the stock price. via owning a lot of stock.
I've read a lot on forums about how traders don't tell their "edge" to the public because they are fearful if by doing so, this current method that feeds their account would suddenly disappear, or maybe gradually, becoming fully arb'ed..
Is this shit even real? Lets say you tell this forum your exact money maker.. lets say a few thousand people start using your method (highly unlikely), would you really see your edge disappear? These strangers would have to trade exactly like you to accomplish this, and of course the trading will differ no matter how similar the set up.
IDK about you but I'm not buying this. Thoughts?
Discuss