I often see posters refering to, or requiring an "edge" to make it as a trader. Sometimes you will find a qualification of an "edge" or a generalized conceptual idea of it, but never anything worth while. Since all traders have the opportunity to see the same data, the "edge" can not be in the input. Is it in the entrepretation? or the application? If someone consistently makes money, are they assumed to have an "edge"? I am coming to the conclusion that the "edge" is just application of any number of reasonable, disiplined actions that over time result in a profitable methodlolgy. You do not buy "edge" in a bottle or by the gram. So my hypothesis on this thread is that there is no "edge", just good trading principles, that may be quite varied. If I need further enlightenment on this, please provide it. I am sure all the "edgers" will correct my misguided ideas. :eek:
Edge is simply taking advantage of the non-random nature of a market. They are quantifiable and persistent through time.
A simple example of a edge in price data is "trend". Every market I've ever checked has a trending tendency beyond random. Some more than others. Incorporating that tendency would be to simply place trades in the direction of the trend.
The best edges (largest degree of non-random behavior) are found external from price data, however. Something as simple as observing money flows into or out of mutual funds several days prior to price moves has been a exploitable edge for myself.
Some people believe edge is nothing more than positive expectancy in a trading strategy. While this could be the case, you should satisfy yourself that the model captures persistent, and non-random opportunities. Otherwise the model will go under when the short-term "fitted" data reverts to it's more random nature.