IMO, recognition and acceptance of the truth of these two quotes by all forum participants would elevate ET to an unrecognizable level of intelligence and civility.
Garachen, Ghost_of_blotto, Rallymode, Thanks for your responses. Without wanting to attract a million PMs my way I believe that I may already have an edge. The edge I have found is a price dislocation as Garachen mentioned above and is actually caused by large order flow being generated on different products around market moving events. It normally lasts for no longer than a minute at the very most until price returns to value. I believe it to be what Garachen describes as "calming the panic". It is by no means at all a chart based reoccurring pattern and only can be found to occur during certain conditions. For example I know when to look for its occurrence but it takes other exogenous variables to align for it to happen and therefore by its nature it is infrequent offering a handful of trades per month but these are of a very high probability outcome. I am also fairly certain that other inefficiencies of a similar form could be located in other products but using the same grounding as it is to some degree microstructure based. What concerns me is that because price is being returned from out of value to in value other market participants are already trading it or perhaps arbitrage algos are picking up on the mispricing and retuning it to value so in theory the available liquidity is already being consumed. Another reason for my concern is why does this edge already exist. Seeing as algos are ever more present in the markets inefficiencies are becoming few and far between so why does the dislocation I am talking about still occur? My thoughts are that algos are turned off during highly sensitive market events and it is when they are rearmed that mispricing are traded back to value. Could it also be that due to its reliance on exogenous variables and its low frequency that it has not been detected by algos?
You can bet that others are trading it too. Watch for the algo patterns. How is the liquidity being provided. Have you researched the microstructure? Who are the market makers, you can bet they know about it. Unless its a very obscure product in this day and age chances are someone bigger and much faster then you is already in it. If you have found something like this then kudos keep quiet and exploit it as much as possible. The only way to know for sure if its legitimate or if you are just being fooled by randomness is to ask garachen if he has a seat on that exchange. If he does then its likely not a true mispricing, if he doesnt then he may just look at it and eat your lunch. lol In all seriousness, you shouldn't base your longevity as a trader on something like this.
If you know who and why will drive your position after your entry (what groups of traders), you have the edge.
The edge is present before any trade is placed.Actually human mind is a negative edge on traders. https://www.elitetrader.com/et/threads/edge-of-buying-the-stock-market-dip.304496/
Is possession of an edge defined by being a systematic winner (high % win rate) or to be non-systematic winner (low % win rate)?
Win rate is not really relevant. It's possible to have a sub 40% win rate and still have a positive profit factor. If you've found something that you can repeat over and over to make consistent money with over a long period of time, that's an edge. We know a lot if not most traders fail long term, so if you can be consistently profitable for 3, 5, 10+ years I'd say you've found an edge. I am sure some people are going to argue they are just getting lucky or it's always 50/50, but you could trade for 30+ years and be profitable every day, week, year and they would still claim the same thing, so debating vs that is useless and holds no value.