Quote from PointOne:
Lets say you are driving to work the same route everyday:
As you approach a particular junction you have learned that if you switch lanes a little earlier than everyone else you get a jump on the next section of the road. After a few weeks of doing this, other drivers have noticed your tactic and you find that you no longer benefit from switching lanes as other drivers are already there in your slot. Seeing this, you carry on to the junction in the same lane and still get away ahead of the cars in the congested lane. Of course, if your driving style does not adapt and take into account what others are doing you just join the queue (following your previously winning, rigid rules) and fume because your journey now takes a bit longer.
I'm just wondering what kind of edge it is that could not adapt to current market behaviour that includes this "edge".
Your analogy is incorrect.
Trading is a different animal.
In trading, people trade their own belief systems and personalities. Take a look at any woodie CCI thread as an example. There are hundreds of supports who claim this method is the best. But if you look closer, what do you see?
* This person recommends changing the parameters to higher numbers.
* Another claims success only after adding a custom MACD.
* Still another believes it works but only in bonds. As he had no success in the indexes with this method.
* Then you have the guy who only uses the CCI to confirm another "free Internet method".
AND THESE ARE THE ONES THAT SAY IT WORKS.
People will add or subtract from the information they are given in an attempt to make it their own.
Hence no system will be traded the same by all people. Therefore, no system will be hurt through over exposure.
The head and shoulders pattern has stood the test of time, yet almost every decent book on TA talks about it.
If people were trying to "front run" the pattern and thus render it useless, would it actually still work? But everyone seems to be saying that "front running" is inevitable if a pattern, or edge is known. The fact that head and shoulders patterns remain viable, belies this assertion. As does a persons natural propensity to change a method to make it their own.
And I have not even mentioned how people react to a loss. Do you really think everyone will take the next trade? What about after 3 consecutive losses? In truth, most traders would be on to the next thing. Successful traders are willing to take that next trade; because they believe in their edge.
But the point of here is, even if you keep the method consistent, people still would not trade the same. Some will take the next trade after a loss, some will not. Some will immediately move on to the next thing. Some will start to tweak. Some will wait until two consecutive losses before taking an actual trade.....
How people trade is as diverse as the people
who trade.
