if you think you have an edge then basically you see yourself as a casino in the market you trade and all other market participants in that market as gamblers
EricP, What's the highest level of confidence you have ever seen in any system? Has a high confidence system (e.g. 99%) turned bad on you?
There isn't a single perfect dice in the world. If the cost of exploiting imperfection is lower than the cost of maintaning perfection, then you have an edge.
Correctamundo! The market's a moving target, so "what's workin' now" frequently changes. So long as your play has 3:1 RR expectancy (or more) and 50%-ish hit rate, you are likley to succeed.
That doesn't help, how many trades should I base my expectancy calculation on?, 20, 50, 200? By the time you find out something's changed you've lost a lot of money!
I've seen many systems with confidence levels over 99%. Any system can deteriorate over time, as the market changes and evolves. Personally, I recalculate my confidence levels daily, based upon the new trades (if any) executed each day. If the confidence level ever drops to below ~90%, then I discontinue trading in the system. I will continue to monitor and paper trade the system, and will reactivate the system only after the market is trading in a way that is more in synch with that strategy again. -Eric
that would mean succesful discretionary trading is just luck. The method can be difficult to define as a discretionary trader can incorporate many different factors each factor's importance constantly being adjusted instictively if you will . A computerized system can never do that and only look at the market a certain way, that is generally from a purely technical/ mathematical perspective.
Hey guys, Heres some info for you of the things I've learned, An Edge unlike most particpants would believe is a combination of edges, If you only have one edge, it most likely won't work but you need to combine this edge with patience money management etc.. and the most simplest of edges can be very effective. Sort of like a master of fighting weilding a poland spring water bottle can probably kill an unskilled person with a sword.
It's not "how many trades", but rather "what your trades are about". If you don't understand how you could reasonably make 10 ES points should this play work out the way you envision, then you shouldn't risk 3-4 points to play it.