Three Sources of Edge

cjbuckley4 said:
I agree with what you're saying about having the right attitude and "mental toughness" being a factor in trading. That's not an edge though, that's just a trait that defines a good trader. An edge, in my mind at least, is a systemic reason your trading pattern does a service to the market, whether that be provision of liquidity or price discovery or both. Just showing up with the right attitude isn't gonna give you positive expectation though. All I was saying was that I would feel unprofessional going up to a boss and reporting that my edge was being psychologically prepared to trade a system.
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Trading, or Successful trading, is not like developing a cancer or Aids drug. -- it's part art, part science instead.;)
So saying or looking for a truly technical or scientific "edge" in this (retail) trading world is kind of silly. :rolleyes:
 
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lawrence-lugar said:
Trading, or Successful trading, is not like developing a cancer or Aids drug. -- it's part art, part science instead.;)
So saying or looking for a truly technical or scientific "edge" in this trading world is kind of silly. :rolleyes:
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99% of this forums problem is that they're too into the art, not putting enough into the science...okay, now I'm really out.
 
cjbuckley4 said:
99% of this forums problem is that they're too into the art, not putting enough into the science...okay, now I'm really out.
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There's several research polls that has "discipline" problems near the top of the poll as the cause to failure in trading.

Other variables near the top are under-capitalized, mismanagement of leverage, poor risk management, trading in poor market conditions, lack of diversification and inadequate resources.

As far as I'm concerned...discipline problems falls under the helm of psychology.
 
Redneck said:
...btw if psychology not so important - why do many firms keep a psychologist on staff / on retainer (rhetorical if you prefer)...
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Many top institutional trading firms hire psychologists to help employees deal with work related issues or personal issues that's impacting their performance at work especially considering many of these individuals make decisions that impact millions of dollars.

This isn't a financial market issue...its an issue for many different types of businesses and I've seen a lot of different terms used to job title (describe) these psychologists being hired.

http://www.profitguide.com/manage-g...e-you-about-to-hire-a-ticking-time-bomb-71384

Terms like corporate psychologist, occupation psychologist, organizational psychologist, HF Consultant, Supervisor Intelligence, business psychologist and one new term I've seen as shown in the link above is "industrial psychologist"...all of them are psychologists.

I believe Credit Suisse and Goldman Sachs uses the term for their psychologist as "industrial psychologist" whereas in the past I incorrectly identified them as just "corporate psychologist".

I remember one wall street firm working with an outside firm called Hogan (a Clark Wilson Group since 1972)...a business in "advancing the science of personality"...basically they help corporations find the right CEOs, Presidents, Vice Presidents or any individuals that will be in the position of making key decisions for the company.

Their motto is the following...

When you multiply the right individual by the right environment, success is inevitable.

Not sure why most retail traders have problems connecting their beliefs, persona, interaction problems with the markets involving psychology when wall street obviously has no problems in such a relationship.

So the issue isn't really if psychology is important because as shown above...its obviously very important to the financial markets. The issue is this...does having the right person in the right position gives that firm an edge in comparison to another firm that does not have the right person in the right position making key decisions for the firm ?

Now lets drop this discussion down to the retail level...

Once again, the issue is the definition of edge considering there's obvious more types of edges out there than the quantifiable edge phrase used to describe automated or systems...there's a large group of traders that do not use automation or system. The profitable few...how do you describe their edge or is it just luck and has nothing to do with the psychology of a trader that's able to consistently follow the trading plan. :cool:
 
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There's no TA discussion here and Mav uses TA.

The thread is about the following description (see his quote below) by the OP and the issue has turned to Psychology of trading. Nothing personal, I'm just trying to keep it on topic without the typical TA hijacking commentary that takes the discussion in another direction.

With that said, the last two traders I've discussed psychology with was a fundamental trader dealing with ADD/ADHD and the other an algorithm trader interested in a company that specializes in behavioral finance computer analysis of social medias fear/greed.

Therefore, what's your edge...analytical, psychology, institutional or some other group that Chuck Krug hasn't mention ?

For example, where does algorithm trading fit in Chuck's group of three types of edges ?

Another example, is it an edge when someone or an institution are given special commissions/fees that are cheaper than what others are given ?

My point is that I'm trying to determine if there more types of edges than the three groups that Chuck has listed considering the biggest thread at this forum on the topic of edges had a majority of ET members saying there's only one type...called quantifiable edge and everything else is just an illusion as an edge.

P.S. I agree with the OP...there are multiple types of edges and not just one type only.

Chuck Krug said:
Three Sources of “Edge”:
1 Analytical edge
Investment framework; smarts/IQ; experience; technical expertise (in a
sector/security/geography/etc.)

2 Psychological edge
Willingness to bear pain and delay gratification; avoidance of (or ability to
exploit) fear and greed; lack of interest in one’s popular perception;
willingness and ability to go against the crowd when appropriate

3 Institutional edge
Properly aligned incentives; optimal size and structure; ability to withstand
pain; searching in the optimal places; having the right clients
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Guile said:
Guys...maybe Mav and CJ have a point. Seems like all this TA bullshit doesn't work for a lot of people.
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Yes. Mav is s real verifiable person with pedigree in the financial markets. Most of the others are nothing but unknoen aliases with some likely stealth vendors with an agenda to decieve you.

With that said, who would u rather believe?

surf
 
Redneck said:
When the majority don't..., the BSDs do - and one is going up against all of em

Yes..., it is an edge

btw if psychology not so important - why do many firms keep a psychologist on staff / on retainer (rhetorical if you prefer)



=========================





Yes.., but then so is this



So simple..., yet so few can do consistently..., over time

Wonder why that is (again rhetorical :) )

RN
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First, the wide majority do not have psychs on staff. When they do, its the

Same reason pro sport teams use psychologists.

You cant put a psychologist on a little league team and expect the team to compete with the big leagues. Everyday in trading the big leagues are your competition.

Once you have an edge, psych can be important to help u execute it but it has nothing to do with the edge itself.

Random entries would be profitable overtime if psych was an edge. Dats a fact jack

Not to mention psych has nothing to do with what causes 90% plus of all volume in the markets -- automation.

surf
 
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marketsurfer said:
Same reason pro sport teams use psychologists.

You cant put a psychologist on a little league team and expect the team to compete with the big leagues. Everyday in trading the big leagues are your competition.

Once you have an edge, psych can be important to help u execute it but it has nothing to do with the edge itself.

Random entries would be profitable overtime if psych was an edge. Dats a fact jack

Not to mention psych has nothing to do with what causes 90% plus of all volume in the markets -- automation.

surf
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Marketsurfer,

You got it wrong there : the Scottish national football team , aka the well loved "Tartan Army foortball team", managed to systematically qualify for the world cup ( not an easy feat), when they had a first class coach. As soon as the coach left/retired, they never managed to not be disqualified at the first round.
This first class coach was a master in psychology, each player was not "that" great.
 
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