Some background: I am no quant PhD, and certainly no hedge fund guy. I am just an engineer with decent programming skill. I have spent a small part of the last 2 years developing and building a pretty simple intra-day trend-following system (fully automated) focussed on currencies. No fancy indicators, just signals based of when price exceeds a simple moving average. After a bunch of backtesting and paper trading, I'm seeing that it actually makes good return and I just started live trading with it. BT results: Sharpe > 1.7, with tight stop losses. While I was happy, I was also quite suspicious to see this working as well. Can someone help me intuit how such systems work? What are the market forces making this system work? Is this effectively taking money from less sophisticated traders? Or, am I riding the wave with smart money who just don't mind taking smaller losses which are actually quite meaningful for retail traders? Why haven't hedge funds/smarter people arbitraged or sucked the alpha out of my system? I've read Ernest Chan's books and it seems that this might be related to 'capacity' but I am still not sure why it is actually working. Thanks in advance.