How do you determine what your edge is?

What do you think about using average trade divided by standard deviation of returns?

 

You mean average return over SD. I can see you have both reward and risk factored in, like CAR/MDD. I think mine is more indicative or direct. CAR is best measure of reward; and MDD is very pertinent to futures trade, as 2% draw down in points of ES means blowing up.

 

Is an edge a profit/loss number or a something that indicates your entry /exit of a trade?

 

All of the above and then some.

Edge is the probability of your trading system making more money than it loses.

Once you have determined an edge you have to make sure your emotions don’t make it ineffective.

 

I like this one. But it has a problem. Let us say you made just 0.001% on a 10M account with 0% drawdown. The value of the parameter is infinity. The guy that made 20% with 10% MDD looks inferior, but actually is not.