How does Maverick run a prop firm and claim that 'the equity game is dead' at the same time? Is it a futures prop firm?
The definition of edge is something one has that others do not have. Not easy replicatable. Anyone can get lower commisions. The reason I brought up vig is because I said equities have a high VIG and therefore REQUIRE an edge to overcome. You understand? And no, equity trading is not very scalable. Not at all. Hence the reason why I said some guys can be marginally profitable. You can't just say, Oh, I can trade 5k shares in RIMM nicely, I'll just start trading 100k shares, LOL. I'm afraid it does not work like that. Liquidity is a huge concern in equities which is why I brought up futures. The more shares you trade in equities, the higher your vig becomes and the more edge you are going to need to overcome it. Hence the reason I brought up PIPES earlier. It's one of the only ways I know of to scale equities with edge. It's also why that is the new frontier in equity trading.
funny! http://www.thestreet.com/_googlen/markets/matthewgoldstein/10193701.html are we talking about the same thing??
Ok now we are back to what I was talking about before. "The definition of edge is something one has that others do not have. Not easy replicatable." YEAH. Hence edge = skill. Like someone earlier said, your edge is whats in between your ears. When you are more skilled than the majority of traders, you take their money. The problem, and hard part, is the process of learning it takes to become better than everyone else. You have already acknowledged the existance of skill in trading. So if there IS skill, then there are levels of skill. THAT is your edge. At least that is what mine has to be. Being more skilled than most. As for the liquidity problem, once i have that problem, I'm sure I will be moving to the products you suggested, and when I have that problem, I'm sure I will be making way more than a school teacher already.
No, edge and skill are not the same thing. Not even close. You cannot learn an edge. Think about the contradiction in that statement for a second. Are you thinking.................keep thinking........think some more..........OK, just a little more..........OK, do you see the contradiction? If one could learn an edge, then it wouldn't be an edge by definition. Right? So this goes back to my ORIGINAL question. If you are relying on skill to make money. Then why not use that skill to apply to a product that has the SMALLEST vig? I understand that you are familiar with equities, but what does familiarity have to do with skill?
may i ask how these are traded by a prop trader at a firm like echo or bright, as an example ??? <i>Dave: PIPES are another one of Buffett's techniques. The first time I heard this term was when you mentioned it above. Please explain PIPES a little deeper. James: A PIPE is a private investment in public equity. For instance, if a company needs to raise money quickly and does not want to go to the secondary process they will often sell shares to hedge funds or mutual funds directly at a discount to where there stock is trading. Dave: Exactly how does Buffet use PIPES? James: Buffett's investment in Gillette was a great example. Gillette was losing market share to Bic and various hostile takeover guys were circling around like vultures. Gillette approached Buffett as a white knight. He bought a significant piece through a PIPE which was basically convertible debt paying 8.75%, convertible at a slight premium to where the stock was trading then. Buffett saw that Gillette would never have cash flow issues so he would always get his coupon and principal back IN THE WORST CASE, and in the best case he converts and makes a lot of money on the stock, which is what happened. He's played PIPES on over a dozen situations, most of which I outlined in the book. Dave: This seems to have lots of the "margin of safety" criteria he adheres to. Am I correct? Do PIPES have the safety Buffett craves? James: PIPES have a huge margin of safety, perhaps more than any other market mechanism. He often gets convertible debt, paying a high interest rate, and convertible into stock at a price he thinks is decent for the company. It's a low-risk situation for him.</i>
Ok let me clarify. Your edge is your SUPERIOR skill. If you have the same level of skill as everyone else, then you have no edge, no profit. Superior skill, through studying, experience, and preparation is your edge. It is something not everyone has, hence SUPERIOR. This has nothnig to do with vig, a smaller vig is beneficial for ANYONE, no matter what edge. So yes, in the future that is what i will be looking to do, lowering my vig. But right now what more important to me is acquiring my edge, Superior skill. I can do that in equities, which is readily available to me. I like the example that someone just used against me, the steroid analogy. A batter can hit a baseball far, thats skill. A batter uses steroids, thats an edge. However, steroids are illegal, so you can't use them, taking away that edge. So then how oh how in the world will I differentiate myself from all the other batters? Whats my edge??? How about getting yourself in a batting cage and practice, until your batting "skill" is better than everyone else.