What is an "edge"?

Option_Attack · Nov 11, 2019

Preachin' to my choir... I started in '99. And I have missed a bunch of the yuuge move up because I am STILL suspicious of the move and expect it to dump 50% any moment. So I spend huge amounts of time trying to perfect systems that can withstand the non-existent crash, instead of just going with the flow.

ironchef said:
3. Lucky to trade starting in 2009 instead of starting in 1999.
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qaz · Nov 11, 2019

2FT said:
It is just a matter of time. Agree.

But for now, my limited understanding is that computers still need input data to be compared to stored data. They can do that in huge volume, many times, accurately and quickly without need for rest. But humans can judge and act without any deep database comparison, or none at all. When I see someone I don't know, I do not compare what data I can gather of them with the database of all known patterns of people I know. I just know.

So humans still have edge over code. For now. And in very limited scale.
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Whether you recognize someone or not, the comparison is still made with your memory. If it matches =recognize, no match = not recognized. It might be quick and feels like intuition but it isn't. We will always hold the upper hand in creativity despite AI having got the upper hand in computation.

2FT · Nov 11, 2019

Thanks @qaz, I enjoyed your conversation on the topic.

I don't want to distract any more from the thread topic. But I will find some time to learn more about how human judgement works. It seems my brain makes a superficial heuristic judgement before a deeper database scan. Not that it is possible for me to tell.

schizo · Nov 11, 2019

schizo said:
21)So far, here's what I've manage to come up with:

1) Edge is a pattern. It could simply be a price pattern on the chart, or it could be a behavior pattern (eg. the interaction between me and/or the market).
2) Edge must be repeatable. It can be repeated, replicated, duplicated each and every day.
3) Edge has a high probability of success.
4) Good entry is a must. Good exit is a must.
5) Good entry is useless, however, if your timing is off.
6) There is no good exit. There is only a proper exit (eg. let your winner run, cut your losses).
7) Good entry is critical, but good exit is even more crucial.
8) Good entry is one with good risk:reward ratio.
9) Getting in too early or too late is a high risk trade.
10) Getting out too early or too late is a low reward trade.
11) Human actions are governed by law (eg. natural law, judicial law, etc.).
12) Laws are devised to preserve self-interests.
13) Hence, human actions are governed by self-interests.
14) Markets are designed to exploit emotions (eg. greed and fear).
15) Prices are pegged to greed and fear.

Pareto Principle (80/20 Rule):
16.1) The market trends only 20% of the time.
16.2) Only 20% of the market participants will consistently make significant amount of money over time.
16.3) What you thought was a winner will turn out to be a loser 80% of the time.
16.4) 80% of the losses can be offset by 20% of the gains.
16.5) 80% of the profit comes from 20% of knowledge and effort. The other 80% is luck.
16.6) 80% of the worst trading decisions almost always stem from lack of discipline, which can be attributed to innate flaws and errors (eg. personality flaws, judgmental errors, etc).

17) Follow the herd―just don't be the last one in line.
18) Do not bottom-fish or pick the top. Trends usually aren't over until you're stopped out.
19) Profit/loss is determined not by where you enter but where you exit.
20) Entry anticipates the future. Exit reflects on the past.
21) Trading decisions are made on the basis of anticipation (opportunity) and reaction (risk management).
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22) In order to succeed as a trader, you need more than just positive expectancy. You need a positive outlook. You will not find a successful trader with a negative outlook in life.

ironchef · Nov 12, 2019

schizo said:
The problem is that you can only get lucky so many times. Eventually, you're gonna run out. What are you gonna do then? Hence, you better listen to your mama and learn how to trade properly.
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By then retire, riding into the sunset.

There are lots of billionaire hedge fund managers who are one trick phony too, made their billions betting on one event and never made significant money again except collecting fees after accumulated billion/trillion AUM.

schizo · Nov 12, 2019

schizo said:
So far, here's what I've manage to come up with:

1) Edge is a pattern. It could simply be a price pattern on the chart, or it could be a behavior pattern (eg. the interaction between me and/or the market).
2) Edge must be repeatable. It can be repeated, replicated, duplicated each and every day.
3) Edge has a high probability of success.
4) Good entry is a must. Good exit is a must.
5) Good entry is useless, however, if your timing is off.
6) There is no good exit. There is only a proper exit (eg. let your winner run, cut your losses).
7) Good entry is critical, but good exit is even more crucial.
8) Good entry is one with good risk:reward ratio.
9) Getting in too early or too late is a high risk trade.
10) Getting out too early or too late is a low reward trade.
11) Human actions are governed by law (eg. natural law, judicial law, etc.).
12) Laws are devised to preserve self-interests.
13) Hence, human actions are governed by self-interests.
14) Markets are designed to exploit emotions (eg. greed and fear).
15) Prices are pegged to greed and fear.

Pareto Principle (80/20 Rule):
16.1) The market trends only 20% of the time.
16.2) Only 20% of the market participants will consistently make significant amount of money over time.
16.3) What you thought was a winner will turn out to be a loser 80% of the time.
16.4) 80% of the losses can be offset by 20% of the gains.
16.5) 80% of the profit comes from 20% of knowledge and effort. The other 80% is luck.
16.6) 80% of the worst trading decisions almost always stem from lack of discipline, which can be attributed to innate flaws and errors (eg. personality flaws, judgmental errors, etc).

17) Follow the herd―just don't be the last one in line.
18) Do not bottom-fish or pick the top. Trends usually aren't over until you're stopped out.
19) Profit/loss is determined not by where you enter but where you exit.
20) Entry anticipates the future. Exit reflects on the past.
21) Trading decisions are made on the basis of anticipation (opportunity) and reaction (risk management).
22) In order to succeed as a trader, you need more than just positive expectancy. You need a positive outlook. You will not find a successful trader with a negative outlook in life.
.
.
.
More...

23) WHERE you enter the trade is important, but WHEN you enter is paramount.
24) If you know how to time your entry, then you also know when to be patient.
25) Knowing when to pay a premium is better than always seeking for a bargain.
26) Market seeks for balance and harmony when greed and fear are misaligned.

easymon1 · Jan 18, 2020

RedDuke said:
Edge is a system or a model with positive expectancy. It is really that simple.
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According to the government, Collins, who served on the board of Australian biotechnology company Innate Immunotherapeutics, called his son Cameron in June 2017 from the annual Congressional picnic at the White House, after he got an email from Innate’s chief executive officer about the clinical trial failure of a multiple scleroris drug then under development.

Cameron Collins, his fiancee, her parents, and a friend subsequently sold more than 1.78 million shares before the news became public, avoiding losses of almost $757,000.

The case shed a spotlight on the lack of restrictions on members of Congress holding unpaid positions on corporate boards. Collins solicited investments in Innate from fellow lawmakers, and at least five other Republican House members bought shares in the company.

Shortly after Collins’s indictment, the House introduced a bill barring members from serving on the boards of publicly traded companies. That bill hasn’t passed into law yet.

schizo · Jan 18, 2020

easymon1 said:
According to the government, Collins, who served on the board of Australian biotechnology company Innate Immunotherapeutics, called his son Cameron in June 2017 from the annual Congressional picnic at the White House, after he got an email from Innate’s chief executive officer about the clinical trial failure of a multiple scleroris drug then under development.

Cameron Collins, his fiancee, her parents, and a friend subsequently sold more than 1.78 million shares before the news became public, avoiding losses of almost $757,000.

The case shed a spotlight on the lack of restrictions on members of Congress holding unpaid positions on corporate boards. Collins solicited investments in Innate from fellow lawmakers, and at least five other Republican House members bought shares in the company.

Shortly after Collins’s indictment, the House introduced a bill barring members from serving on the boards of publicly traded companies. That bill hasn’t passed into law yet.
More...

Why am I not surprised? Oh, I know, they are all thieves--both left and right.

Neuroway · Jan 18, 2020

What's an edge? This is one.

https://en.wikipedia.org/wiki/Gladius

volpri · Jan 19, 2020

Whatever you may define an edge to be it is certainly not something that is necessary to make money in the markets. Therefore, it is generally an illusion to find, discover, or construct one. And if thus found it usually will work only for a while. It is a time consuming task to find or develop one. It reeks of competition and secrecy. In the end most traders give up trying to find one. After trying, perhaps hundreds of indicators, in maybe hundreds of variations. And not to mention the colosal back testing.

A trader is better off to simply understand that successful trading is not about being in competitive state with the market, other traders, and winning over them. Successful trading is actually quite the opposite. Being successful in trading is really simply about being in agreement with the market, and being in agreement with other winning institutions and winning professional traders. A trader does not need an edge. He just needs to know how to read the market and determine which institutions are winning at the moment and join them. Trading by edges is fleeting. Here one day and gone the next. Discerning the pressures in the markets will always be here and there is nothing secretive about it. It is ALWAYS out in the open. Such a trader has no secret edge to hide from other traders. He can actually tell them “why” he is taking a position. If they join him it will simply make his trade more successful.

I would strongly recommend give up hunting for an edge. You don’t need it. If perchance you discover one it will be fleeting and soon disappear. Instead strive to understand the pressures in the market and go with the winning side. No one can take that from you. And you may tell the entire world what ..and why ...you are doing what you are doing and why you are taking a position. Divulging such info to others will NOT weaken but rather strengthen your case should they decide to join you.