This subject has not been defined correctly in many threads on E T . After almost 100 posts on the following thread ,the definition of edge is unclear .Since 80 % of trading success is psychology ,I would say the following article defines your edge. http://www.andrewmenaker.com/category/edge/ http://www.elitetrader.com/vb/showthread.php?s=&threadid=219739&perpage=6&pagenumber=1 http://www.elitetrader.com/vb/showthread.php?s=&threadid=236496&perpage=6&pagenumber=1 What do you think is the edge , since many riffraffs use the word edge without any knowledge of edge.
My edge is superior analysis of the short-term trend reversal process. I correctly identify and profit from short-term trend reversals ~65% of the time because I know what to look for. This requires an in-depth understanding of price, time and volatility. It's easy to tell, from my vantage point, that most people are flailing around without a clue. Psychology is only about 18% of success for me. That is the difference in profit factor between the most psychologically "difficult" variation of my strategy and the most psychologically "easy" variation.
How does your edge define which short term trend reversals to go for?Only some of the trend reversals are profitable, and only some 35% is my guess.
That question basically boils down to "What are the details of your strategy?", no? Obviously, I'm not going to give a detailed answer to that. I have come up with a completely new (as far as I can tell) concept in volatility analysis. That enables me to discern which trend reversals are real and which ones are retracements. Once my volatility analysis says that a trend might be reversing, I have about a 2/3 chance of being correct.
This is the first time I've calculated it, but there are two variants of entry strategy I can use. The first is psychologically a bit more difficult, due to where it requires you to enter a trade relative to some other factors my model takes into account, whereas the second does not have such a requirement. The difference in the profit factors between the two is about 18%. So, as a proxy for how much psychology impacts my results, that seems like a fair estimate. If I go for the "easy" variation, I'm essentially leaving money on the table in exchange for less psychological angst while in a trade.
I think you have something good there.I generally don't give compliments , very rarely do I give them.