How do you know if it's luck or real edge?

Discussion in 'Trading' started by wyang, May 10, 2005.

  1. yeayo

    yeayo

    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:p
     
    #11     May 10, 2005
  2. wyang

    wyang Guest

    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?
     
    #12     May 10, 2005
  3. wyang

    wyang Guest

    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.
     
    #13     May 10, 2005
  4. Are you answering your own question ???

    NihabaAshi
     
    #14     May 10, 2005
  5. gnome

    gnome

    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.
     
    #15     May 10, 2005
  6. wyang

    wyang Guest

    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!
     
    #16     May 10, 2005
  7. EricP

    EricP

    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
     
    #17     May 10, 2005
  8. 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.
     
    #18     May 10, 2005
  9. 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.
     
    #19     May 10, 2005
  10. gnome

    gnome

    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.
     
    #20     May 10, 2005