I’ve read here and there where people have said that over time, any edge that someone discovers will disappear.
Now some of these people are paranoid types that think that your method of trading gets taken advantage of or sold by your broker once they identify you as a winning trader. That type of conspiracy theory nonsense is not what I’m talking about.
I’m referring to the idea that “the market” somehow reacts to what you are doing in a way that eliminates your system’s advantage.
Is this true?
Also, if your participation in the market generates the conditions to which the market reacts in order to erase your edge, couldn’t you overcome such an obstacle simply by randomly taking a day/week/month off and not applying your edge? It would seem that such moves would make it impossible for the market to adapt to your edge if you are removing it from the mix entirely. In fact, if your edge was significant enough to be reacted to, the absence of it being applied would in and of itself be a source of confusion to market dynamics, wouldn’t it?
Think of it like the Hawaiian Islands. They are sitting in the middle of the ocean taking up space, if they all of a sudden disappeared leaving a gaping hole in the ocean, the surrounding water would fill that hole within seconds and cause chaos because its absence was unexpected. If the islands then immediately reappeared out of nowhere 5 days later and quickly displaced the water, this too would create a distinct disturbance.
Scaled down to the original idea of an “edge” being present in the market, if it was there and being adapted to and then all of a sudden it wasn’t there, this would create a local disturbance for whoever was adapting to the edge. I’m guessing that if the market has a natural pattern of finding and eliminating someone’s edge, it doesn’t do so as quickly as water filling a gaping hole in the ocean. It would take more time.
So when an edge is present, the market goes to work isolating and eliminating it. But if the stimulus was removed prior to this being achieved, the LACK of the edge to which the market was applying “pressure” could cause the market to react (on some small scale) in a chaotic fashion to the stimulus being removed.
Of course, one could argue that the actual disappearing and reappearing of the edge in the market then could be considered ITSELF a pattern - unless such disturbances were injected at random and extended for a random period of time. Thus you could stop working your edge for one day every month and then every three or four months extend that to three or four or five days instead of one.
Am I thinking about this correctly? Is there a flaw in the logic? Or is the idea that anyone’s edge gets quickly negated just more baseless negative thinking which can be better explained by individual trader’s discipline breaking down over time with the negative results being falsely attributed to the “edge” being neutralized?