What is an edge?

jk90029 said:
Note that modern stock market was running 400 years from Netherlands.

For example, suppose we (people in the world) have all equal asset evenly as much as 100 at 400 years ago.

Now suppose one trader at 400 years ago find a way to conquer ONLY 6% of the neighbor's asset EVERY YEAR. (100, 106, 112.3, ...)

Simple math says 1.06^400 = 13253973744 seems to be bigger than today's population in the worlds.

Therefore there is NO TRADING LOGIC which kept CONTINUOUSLY 6% compounded over the 400 years. If there was, then one person has ALL the asset now in the world.

Please tell me if there is error here.

PS) Also I heard the average interest rate was roughly 6%, over the 400 years
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In addition to valuable assets not being evenly distributed, you need much more information in order to get the math OK here. 6% of what?
  • 6% of itself, then obviously the bigger whale you become, suddenly something may change overnight (the "new" Kodak-moment, or Blockbuster). It's hard to always be right, especially with so much invested. Both Kodak and Blockbuster took on new technology early mind you, but were unable to leverage those efforts.
  • 6% of assets, are you then counting new enterprises, new resources, new technologies, etc.?
  • 6% of currency, are you then counting new currencies, replaced currencies, changes of worth between them, printing of currency and hiding of currency?
We also have had at least 2 world wars in between, Marshall-aid, "New Deal" and various crises over the years. With enough information, it should be possible to roughly graph out what happened to all the valuables over time.
 
One way to think about edge is the cutting-edge of a knife. Will you choose to cut a steak with a dull knife with very little edge or will you choose a knife that has long sharp edge. Hopefully with trading, you will choose a method that actually helps you to carve out profit surgically.
 
Edge is an inherent advtange you have over everyone else. It makes the playing field unlevel.

There are three legal edges:
Finance costs (big banks)
Access to investment opportunities (buffet getting calls when blue hip companies need his investment for confidence)
Information (sac and hedge fund “consultants”)

Real edges will create free money opportunities.
 
Trader with and edge will see his equity fluctuate due to variance.
Trader with no edge could also recover from a draw down,but this will be rare.

No recovery,no edge-case closed !
 
Robert Morse said:
An edge comes from a process you have, to place a bet on an occurrence where you have a higher probability of success than loss. For Blackjack, it is card counting. For trading, it can be anything that works consistently. Most "retail" day traders find this with some type of charting technique. Most banks and institutional find unique data sets to exploit.

Bob
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This. I read so many books and blogs and forum posts ad nauseum before I finally got what the hell it means. A defined strategy (entry, exit, and possible adjustment criteria for trades) that has positive expectancy. That's it. It's not as mysterious as innovating some new technology like a lot of people make it sound.
 
kj5159 said:
This. I read so many books and blogs and forum posts ad nauseum before I finally got what the hell it means. A defined strategy (entry, exit, and possible adjustment criteria for trades) that has positive expectancy. That's it. It's not as mysterious as innovating some new technology like a lot of people make it sound.
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However, to get the positive expectancy you pretty much either have to apply some existing technology in an innovative way or actually create the innovative technology.

Markets are much too efficient to apply something as pedestrian as an SMA crossover with a stop loss and money management wrapped around that, for example. : )
 
So often " the edge " is something new. When Bollinger first produced his bands for instance it was new and created profits, but now it's been around for years and no good.
So what is on the new horizon ?
AI that's what
And quantum computers.
Until the herd take over and reduces your edge to dust.
 
I think the edge stands for something like as follows.

In the Roulette in casino, we lose 49 to 51, which means we lose 2% to casino in EVERY HAND.

Is it?

Likewise, if we have an edge in trading like 10% IN EVERY YEAR (average), then he SHOULD be a consistently winning trader in the long run(50 years from 30 to 80), expecting 1.1^50 = 117.3909 times for the 50 years.
 
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