here is a topic that might be interesting to discuss. many talk about how "i have an edge and you don't so you suck". but what is the nature of "an edge"? the market is supposed to be very close to being random, yet there are ton of people on ET running around shouting "I have a REAL edge, I have been trading successfully for 1, 3, 10, 15 years, etc". how on earth did they manage to find an edge? how can they be even sure that their edge is real? some "edges" that i personally have some experience with seem to fall in two categories: 1. "selling insurance"- you insure about some sort of a black swan. selling insurance can and will be killed by a black swan. 2. those that can and will be killed by larger position size 1.1. selling OTM puts (sell insurance against stock/market crash) 1.2. buying gap-down (i consider this one also as selling insurance againt stock crash) both can work well for a very long time (so they may appear as a real edge for an extended period of time). yet, just one outlier can destroy years of work. is this the real edge? 2.1. scalping using small position size. i guess this one works because one gets price improvement compared to larger orders. in my limited experience the edge appeared tiny, but maybe i did not know what i was doing. anyways, this type of edge will certainly be killed as the entry size increases. is this the real edge? do you employ other type of an edge? what makes you believe your edge is real? discuss away!
kind of a corny answer but if you drive a car everyday, u have to use the accelerator, the brakes , and the steeering wheel, a mistake on any one of these could result in a loss. So your above point about one big loss could wipe out years of work, depends on your driving skills, which would be your edge.