If edge is hard to get, why traders keep trading?

Discussion in 'Psychology' started by OddTrader, Jun 24, 2009.

  1. Sushi


    Why do people go to casinos

    No edge possible there

    People like to lose. And when this losing is tempered by the occasional win. Itsan addiction

    very sad. Same dynamic as degenerate gamblers
  2. dozu888


    people keep trading because most of them don't know that edges are hard to get..... the thread you quoted is a perfect example that 95% of the people on this site don't even have the basic knowledge about statistics, and they mistaken things like money management, risk control, discipline etc as an edge.

    these are not an edge... an edge is positive expectancy (which is not the same as risk: reward of 1:3 etc, if it's that simple, we set risk/reward ratio of 1:1000 and everybody would be billionaires).

    money management, risk control, discipline does not give you positive expectancy.... if you trade a zero to negative expectancy way, these things only guarantee that you die from a thousand small cuts, instead of a sudden blow-up.

    So where does positive expectancy come from? For the system trading guys, it's about crunching numbers and taking advantage of a market behavior while it still lasts (nothing last for ever). For the discretionary guys, it's about understanding human behavior in an auction market structure.

    Neither approach is easy, the system guys face competition from the big firms with PhDs and super computers; the discretionary guys probably take years to have a reasonably good level of understanding.

    Ignorance is bliss - that is why people keep trading.
  3. Good point...

    And the sad thing is, you can give 100 traders a strategy that has a great edge, and 95 of them will still screw it up...

    Step 1- Find an edge
    Step 2- Execute on that edge

    Most people never even get step one right. Those that do rarely ever get step 2 b/c of mismanagement, psych, and all the other reasons why so many traders fail.
  4. ElCubano


    and there is also the possibilty of putting together a string of winners and making more money than any other job while wearing boxers in the comfort of your own home.
  5. dozu888



    Negative expectancy does not guarantee losing - just like people can still hit the jackpot when they buy lottery tickets.

    which confirms my original point - ignorance is bliss.
  6. I seriously doubt that. They may be perceived to have an edge but it's just fiction in most cases, thus the continuous losing.

    But, do feel free to remind me of all individual edges out there that people have been given and continue to lose money with.

  7. dozu888


    sort of agree.... back in the turtle days, when a simple break out still had an edge, the turtle students did generally have a certain level of success.
  8. 'You can't win without an edge, even with the world's greatest discipline and money management skills. ... If you don't have an edge, all that money management and discipline will do for you is guarantee that you will gradually bleed to death. Incidently, if you don't know what your edge is, you don't have one." --- (New Market Wizards, page 463)

    "Good money management alone is not going to increaese your edge at all." --- (NMW, Page 175)
  9. ElCubano


    does positive expectancy guarantee winning?
    #10     Jun 24, 2009