Regardless to the definition of an edge... I believe that if someone has an edge, they are less likely to share that edge at a public forum where most people are anonymous versus sharing it with someone they personally know and in private or in an environment that they control. Seriously, if you meet some beautiful sexy woman and you spend many days in bed with and then one day while you're trading....she sits down next to you wearing one of your shirts and nothing else...she then whispers..."please explain to me what you're doing and share all the details"... I bet you'll tell all. Now compare that to going to Elitetrader.com or any other forum or social media (e.g. twitter, stocktwits) that's full of people acting like jerks or trolls...the odds of you publicly sharing your edge to anonymous people you don't know while knowing those jerks/trolls will be able to access the shared info too is extremely low to zero percent unless you specially know you're only sharing some details but not all of it. Simply, sharing is often decided by the location and the person you're sharing with.
This is true. Take me for example. I am currently in the process of negotiating with a plugged-in friend of mine to get a meeting with a guy who is willing to throw a few $MM at us if he likes my strategy/system. I could take my meager bankroll and trade it myself, compound my monthly returns for a few years until i get to a couple million. I've finally made it! Or, I can trade it for a few months, put together a performance/risk report, have some NDA's signed and get in bed with a whale who is willing to put up $MM's and a 50/50 split with some initial loss guarantees. So instead of making a projected $200k in 2016 I can end up making a projected $1.5MM. But even with this acceleration in buying power and the potential to use this "system/strategy" as a basis for an actual fund management company and make millions before 40 I am deathly afraid of sharing this shit with the wrong people because it's not rocket science and I don't want the edge to get arbed out of the market. The only reason I'm considering it is because my buddy is a good firned of mine and he really trusts his mentor, has been through some tough trades/deals with him, etc. Stand Up Guy. So my point is that even with the high probability of major success within a short amount of time the fear of losing my edge by sharing my system is overwhelming.
Thanks for your replies. Follow up question: So an edge isn't a chart pattern then, correct? Do people make consistent money looking at charts only?
Most don't make consistent money but a some do. There are lots of threads here at the forum with in-depth discussion about the definition of an edge. Just use ET search to find those threads. Yet, I'm sure you've seen a few of those threads considering you've been a member since 2003.
Almost anything works if the risk mgmt is done properly. I only deal in index options for the last decade+, but I have a friend that trades the ES futures. He has a system for guessing the direction of ES. When his criteria are met, he will go short or long ES. He sets a stop at 2 points of loss and another at 7 points of gain. If he's right more than 25% of the time, he's profitable. He's been making good money for years. An "edge" is anything that is going to make you money consistently over time. I've seen and heard of some absolutely bizarre stuff that makes people money. I wouldn't do a lot of it, but good for them. Another note about the way I trade. There are times when certain strategies need to be tabled and you need to just sit out. I don't care what your occupation is, there are times when you need to STOP doing it because the risk is too high. That's why landscaping guys don't mow the yard during a thunderstorm. I think that's especially true with options - again depending on your strategy. Some strategies are better with high volatility, others not. A key part of the risk mgmt piece is knowing when to turn off the mower and go in the house. That grass will be there for you when the storm is over.
I hate when people say this.. Talking about almost anything will work if risk management is in place.. It's clear that you don't day trade for a living (pay your bills every month from trading profits) so please stop making claims like that... Make claims on your option plays but not day trading futures.. I will bet you a lot money that your friend doesn't just guess ... I guarantee he makes a strategic guess on every trade.. If he doesn't, then why does he waits for a certain criteria to take trades? Smh
One of the most famous edge in financial markets was the negative correlation between s&p and T bonds. Marty Schwartz was one of the first to exploit it during the 80's and became milionar in 1 month. Indeed, at this time, equities trader looked only at equities, bonds trader looked only at bonds. Two separated worlds! Read his book "Pitbull". So to answer your question, an edge is a way to do things differently than the others before it is widely spread. For example, as of today, technical Analysis is still an edge of course... until everyone abuses it. CM
I do not day trade futures. Not sure (from my post) where you got the impression that my friend was guessing. I wrote "when his criteria are met". He has an elaborate system that he has honed over the years based on a series of metrics and conditions. The guy is loaded. The point of my original post was to encourage those here that are trying to make money consistently in the markets - that there are many many ways to be consistently profitable. And it bothers me that we have so many ET'ers that KNOW FOR A FACT that some generically stated strategy is incapable of making money. There's a big difference between something being impossible vs. someone else not being able to figure it out.
Nobody will ever share true edge. I milked the shit out of a risk free arb that few knew about some years back (took 20k to nearly 1m in 5 years), nobody would have paid me enough to reveal this cos it was free money to me. Anything that requires the trader to risk his money when he puts on a trade is not a true edge, of course this doesn't mean that its impossible to make money trading direction, its just a lot more difficult to be consistent and its never going to be as profitable.
There were tons of market inefficiencies in the 80s and 90s, I think clubberlang wrote about this somewhere on ET, it was the wild west back then, anyone who was smart enough to exploit those efficiencies became fabulously rich. Btw I don't think technical analysis still gives anyone an edge, maybe a small one but I don't think that alone is sufficient to overcome the cost of trading (yes cost matters, neke's journal is proof that it matters).