What kind of Edge you have?
- Thread starter carrer
- Start date
Sounds like a very simple system. I have actually tested a moving average crossover system with ATR stops. It worked however the MAs' parameters had to be optimised. Therefore, I had no confidence in them as the market now will not be the same as the market in the future (based on MA crossover approach).
Do you have any examples uploaded anywhere?
Talking directional trading, EURUSD, and chart only, with particular reference to intraday movement. My observation is that price dynamics is the resultant of a number of technical plays going on at all time on all time scales, cooperatively or competitively. TA provides the common tool set and analytical framework. TA isn't about predicting. The movement of price is practically entirely technical.
Exploitable repeated typical price behaviors, or 'edges', come in great variety. Some of them revolve around:
Tipicity of impulse and corrective moves configurations (broadly speaking Elliot based), insufficient by itself. Deformed by other plays on all but the quietest market phases.
Relative measures in price and time (Fibo type stuff) This is a vast area of research. Some things work others don't.
Countering relatively sophisticated TA set-ups (for example set-ups built around Fibo projections)
Trendlines. Overall very useful. Some work some don't. Some stop working and then they do again. Some are created for a purpose, a few just happen.
Geometric figures. There is something of significance and not random going on about triangles and parallelograms drawn...
Configuration similitudes both direct and inverse, at different scale. (stuff that passes the random chance test)
Bar patterns. Price exhibits bars sequences that are remarkably similar in appearance. Some of them look so obvious and so artificial in nature that it makes one wonder. (at least it makes me wonder. Personally I wouldn't touch the stuff with a ten foot pole)
(plenty more I'm sure)
Useful guidelines include:
Countering extremes.
Reversion – Retrs. Inevitably price retraces. In my view most are tied to counter accumulation for a technical play. Sometimes it is more prominently a shake-out with some technical underpinning to it.
Countering retails both as in monitoring their flux and opposing easy expectations as derivable from “common sense” or simple symmetry considerations or some TA notions
Anticipatory nature. Money is in the production of signals more than in the signal itself or in its opposition. It is the work of magicians (or jokers) that produces all the wonders that simple minded folk look at.
Confluence. Of course when a number of technical reason converge in suggesting the same direction, the effects are intensified.
I believe there is no edge in common TA notions, either positively or in countering them. The game is essentially oblivious to those except perhaps when a real reversal reason coincides by chance with a silly TA one, in which case it acts as reinforcement in what to some extent must be an in-joke with traders. Of course excluding the broadest TA concepts such as trend which inevitably remains but is by itself nothing more than a concept, lacking any necessary specifics.
An ideal, allmighty tracker of all playson EURUSD would probably require dozens working on serious custom software. Then there is all that there is beyond the chart, with order flow and intermarkets and hedges and FA for long term orientations.
Exploitable repeated typical price behaviors, or 'edges', come in great variety. Some of them revolve around:
Tipicity of impulse and corrective moves configurations (broadly speaking Elliot based), insufficient by itself. Deformed by other plays on all but the quietest market phases.
Relative measures in price and time (Fibo type stuff) This is a vast area of research. Some things work others don't.
Countering relatively sophisticated TA set-ups (for example set-ups built around Fibo projections)
Trendlines. Overall very useful. Some work some don't. Some stop working and then they do again. Some are created for a purpose, a few just happen.
Geometric figures. There is something of significance and not random going on about triangles and parallelograms drawn...
Configuration similitudes both direct and inverse, at different scale. (stuff that passes the random chance test)
Bar patterns. Price exhibits bars sequences that are remarkably similar in appearance. Some of them look so obvious and so artificial in nature that it makes one wonder. (at least it makes me wonder. Personally I wouldn't touch the stuff with a ten foot pole)
(plenty more I'm sure)
Useful guidelines include:
Countering extremes.
Reversion – Retrs. Inevitably price retraces. In my view most are tied to counter accumulation for a technical play. Sometimes it is more prominently a shake-out with some technical underpinning to it.
Countering retails both as in monitoring their flux and opposing easy expectations as derivable from “common sense” or simple symmetry considerations or some TA notions
Anticipatory nature. Money is in the production of signals more than in the signal itself or in its opposition. It is the work of magicians (or jokers) that produces all the wonders that simple minded folk look at.
Confluence. Of course when a number of technical reason converge in suggesting the same direction, the effects are intensified.
I believe there is no edge in common TA notions, either positively or in countering them. The game is essentially oblivious to those except perhaps when a real reversal reason coincides by chance with a silly TA one, in which case it acts as reinforcement in what to some extent must be an in-joke with traders. Of course excluding the broadest TA concepts such as trend which inevitably remains but is by itself nothing more than a concept, lacking any necessary specifics.
An ideal, allmighty tracker of all playson EURUSD would probably require dozens working on serious custom software. Then there is all that there is beyond the chart, with order flow and intermarkets and hedges and FA for long term orientations.
My edges are just those that have existed since the very beginning of price movement 100+ years ago.
Agreed that three of the edges are the same...I didn't know which one to click. My "edge" is passed on price action, which forms patterns, and which I review in candles.
I disagree that TA can not predict or see in the future with any degree of certainty. I might be arguing semantics here, but is 51% (after trading fees) a "degree of certainty"? If so, then it is enough to get the job done if you're willing to churn and diversify. You can diversify by holding multiple positions at once, or repeating the same situation over and over. The problem is that if your method loses almost half the time, you better not lose it all on each position because a half of a half of a half of a half is only a sixteenth, and that sucks. So, not only do you need at least 51%, you need to set things up to where your loss on a trade isn't the entirety of the position...or you're playing with fire. Me? If I lose, I might lose a few percent of one of multiple positions....I can lose a lot of those in a row and keep going.
Can I see into the future? Only in certain situations, and not very well, and not very far, and I need to be lucky enough that no upsetting news items come out that disturb things, but lately its been enough.
Which category does it fall into?
I would just say price movement as a whole, but by the categories you have set up, it would fall into price action and patterns. Not sure how price action and price movement differ though.
Thanks for the reply.
Sure I get your drift, and I think you'd be right if the 51% (thus 1% edge) was going to continue forever. My point is that it is very, very unlikely to.
Not necessarily because people have cottoned on to it and it's now over crowded or people are fading, but simply because markets change.
Thats why I cant quantify TA as a valid edge. It's a short term edge at best, and when it goes, you'd better discover PDQ and find another. Even if your edge was 10%-15%, your returns will soon turn to dust in short order when that edge goes and you keep trading it.
You have to ask what service are you offering the market trading TA on an outright/flat price structure? Especially if crossing the spread. Very little. I believe providing the market with a genuine service will provide an edge. You need a return to help the market function:
Buying 2 spreads for 4 and selling the fly at 5 however will always work by definition. (Getting those spreads on at 4 and getting 5's in the fly is getting harder!) You are facilitating trade, providing liquidity, and keeping the components of the market in relative value to each other. You should get paid for that. Its no different to buying apples for 2, pastry for 2 and selling apple pie for 6. You're adding value!
I'd run far and wide from any clown who claims to have backtested some price pattern and claim it works forever on multiple time frames. Im sorry, there just isnt any 'edge' in trading a 5min ES chart. Or a 1min. There just isnt. The market exists to take money from clowns who do this kind of thing - are there are plenty of them!
Last edited:
I do agree with you to a certain extent, because I myself have not found any price action which is profitable in the 5 minute or the 1 minute time frame. But I sometimes wonder how some traders trade ES intraday profitably. Not a year, but profitable for many years.