Discussion in 'Trading' started by in56, Jan 10, 2007.

  1. in56


    Can this be my edge?

    Money management

    and pattern recognition

    What is "The Edge"?
  2. Yes, of course.

    Edge = Probability.

    Every trader has his own edge for a trade, otherwise he wouldn't even place any trades at all.

    However the main point would be the probability of each trade varies - Ranging from 0% to 100%. :D
  3. Here in ET people speak about 80 different edges.

    They call them edges and they feel that they come and go for a set of reasons that they have defined.

    Those three things you listed aren't what constitutes or contributes to making money.

    The one monitoring subject that you mentioned which is on price charts, is sometimes mentioned among the different edges.

    For whatever reasons, there usually are not a lot of specific responses to threads on edges.

    Here is a specific comment on pattern recognition.

    Most edge traders do entires and exits.

    The explanations on exits from trades originating with respect to patterns very often have nothing to do with pattern recognition to get out of the trade.

    Learning patterns is an activity that puts you in a specific place at the end of the pattern usually. That place is on the sidelines at the time the pattern ended.

    An entry if any, at the end of a pattern is triggered by a non price initial event.

    The path to expertise has many forks along the way. A common one is: "This edge doesn't work anymore".

    The main trunk of the tree with the many branches is not one that begins with edges. At the base of the tree there is something very different that is OT for your OP.
  4. an edge is anything that gives you better performance than trading based on flipping a coin.
  5. lindq


    What specifically gives you confidence that you can outwit 10,000 other traders, and consistently pull a profit from the markets?

    If you don't have the answer, then you don't have an edge.
  6. Only you can answer that via comparing your trading stats from a well documented trade journal that involves more than just your trade execution info.

    Simply, are you profitable or losing when you trade without discipline versus trading with discipline???

    If the above shows that your stats are fairly close with or without discipline...

    There's no edge to your trading plan.

    However, if the above shows that your stats improve (more profitable) when you have more discipline...

    You have an edge.

    Do the same for money management, pattern recognition, patience or anything else you may think involves your edge.

    Also, just because something is an edge for you doesn't imply it will be an edge for someone else.

    For example, I keep a well documented trade journal and I reviewed three years of trading notes and noticed that I was most likely (73.6%) to end the trading day at a loss if I traded while sick (flu, sinus problems et cetera).

    With that said, can I use the above info (73.6%) as an edge to let me know when not to trade???

    I recently had a nice win streak snapped by trading on a day one of my teeth (back tooth) split in half that required a trip to the dental office for an emergency treatment...extremely painful.

    The above prompt me to take a look at my past info about trading on days when I had a health problem.

    That's the point...some here have a difference opinion of what an edge is and my definition is if you can show statistical information that helps or can help with your trading...

    It's an edge.

    I now know the next time I have a health related issue...

    Take the day off from trading because the markets will be here tomorrow.


    By the way, there's an excellent past thread here at ET about Edges.


    Therefore, I agree with what walterjennings said...

    There's more to trading than just entry signals and exit signals.

    (a.k.a. NihabaAshi) Japanese Candlestick term
  7. atozcom


    You do not need to outwit 10,000 other traders. You only need to outwit the ONE trader, the one that take the other side of your trade.

    If you win, the other trader must loss.
  8. maxpi


    Money management may be more useful for preserving your mental capital than enhancing a system with an edge. It is necessary to have some sort of money management of course to keep losses small enough so you can stay in the game, in that regard it will enhance a system.
  9. Another thread on this huh.

    The real edges come from knowing something most do not, or having access to 'deals' others do not. Sometimes you are so BIG you can force the market to bob and weave to your own music.

    That's how Mr. Sachs makes a lot of the money.

    For a piker like you, (nothing personal), you had better figure out something about the market(s) that most haven't , and trade on that sliver of information edge.

    Or you can just play long and hope the long term upward drift carries your account along with it.
  10. bighog

    bighog Guest

    Well i think Jack Hershey is missing the point about where and what an edge is in a game of probability.

    Pattern recognition is not an edge, pattern recognition is more understanding how the mkt is TALKING to a trader. Pattern recognition is more about what to do WITH the BREAKOUT of a pattern. In other words: Knowing the odds of what the mkt will do next by understanding the "TALK" of the mkt is where a trader will play the odds from the BREAKOUT of a pattern, a levels support/resist etc.

    I think most traders use the term "EDGE" as what works for the specific trader.

    Jack seems to miss the reasons for an entry or exit in the first place. we trade when we feel the odds are in our favor. What else do we have?

    I have an edge: my edge is avoiding the mistakes that i had to deal with in understanding why i took trades in the first place. Now i know why i take trades, i know the intuition says you have seen this breakout before, go for it dude, go for it. place a stop always, in a game of probabilityb losses are to be dealt with.
    #10     Jan 10, 2007