Theoretically, shouldn't any indicator-based or relatively simplistic strategy have no edge at all?

Discussion in 'Trading' started by CyJackX, Oct 29, 2020.

  1. R1234

    R1234

    There are tons of weak edges out there. The vast majority of people look at the weak edges and toss them out maybe because the sharpe is 0.5 or has losing years, etc. But interesting things happen when you combine non-correlated weak edges. The sum will be greater than the parts.
     
    #21     Oct 30, 2020
    guowei58 likes this.
  2. Pekelo

    Pekelo

    There is a faulty premise in the OP, namely that one can only make money by having an "edge."

    Being long in a rally or short in a selloff is not an edge, yet profitable. Also different people have different timeframes so just because someone is selling that doesn't necessary mean they are shorting the market, they may just getting out of a much earlier long.

    TL;DR: No.
     
    #22     Oct 30, 2020
    guowei58 likes this.
  3. lindq

    lindq

    There are thousands of instruments that can be traded, in an infinite number of time frames and combinations.

    I wouldn't lose any sleep over your secret sauce being stolen, and wouldn't let that concern keep you from trading.
     
    #23     Oct 30, 2020
  4. guowei58

    guowei58

    Instead of guessing if you have an edge or not, just trade the strategies that are working so far and get rid of them when they stop working for whatever reason...and pick them up again when they start working again...it's not an "intelligent" approach but sure beats getting into a theoretical discussion that doesn't have good answers.
     
    #24     Nov 2, 2020
  5. Blitzjoker

    Blitzjoker

    I would have thought that a trading strategy leading to that outcome is exactly what an edge is.
     
    #25     Nov 2, 2020
    tomorton likes this.
  6. Pekelo

    Pekelo

    So we have a definition problem here. For me, an edge is some kind of advantage over other participants in the market. Being long in a rally is not such thing, so not an edge.

    If you define edge as being profitable, then why not just call it being profitable? :)

    TL;DR: Traders/investors can make money without an edge.
     
    #26     Nov 2, 2020
  7. Blitzjoker

    Blitzjoker

    Ok; so you can have an edge without being profitable by your definition? To me, having an edge is having some kind of systematic approach that enables you to make gains in the market. And of course you can be profitable without having an edge (for a while anyway) just by good fortune so there is a difference.

    So we can agree to differ on that one, but I think my definition is more useful. By your definition you could just lose money more slowly than the average person, so actually not participating in the market at all would be an 'edge' wouldn't it, as the majority of people lose money in the markets?
     
    #27     Nov 2, 2020
  8. tomorton

    tomorton


    Surely edge means an edge over random, its not defined by the other participants.

    Please, I don't want to have to climb into the loft to get my Mark Douglas's out...

    That said, yes, many experiments have shown that random entries can be so well managed as to be profitable. In that case the money management would be the edge.
     
    #28     Nov 2, 2020
    They likes this.
  9. Pekelo

    Pekelo

    We actually agree.

    1. That is not what I said.
    2. Agree, but that doesn't mean all profitable approach is an edge itself.
    3. See? We agree.
     
    #29     Nov 2, 2020
  10. Pekelo

    Pekelo

    I never said random. Being long in a generally bullish market environment is not random.
     
    #30     Nov 2, 2020