After spending many years lurking on trading forums, looking at hundreds, of systems and strategies, I always have been left wondering, where is the edge?
The system looks great. The chart is a work of art for Pete’s sake. The ideas and logic behind the entries and exits sound logical, but the edge is never seen. All too often, it’s nowhere to be found.
Some people argue it’s in risking less than you stand to make. But simple math easily debunks the idea that a particular risk:reward ratio alone can give you an edge.
Technicians will tell us it’s in a special indicator or a special combination of indicators that are built on secret codes. At this point, every indicator has been data-mined to hell and back to find what works best on any particular pair. Unfortunately, as soon as you move into the future, the models break down, and your secret settings no longer work because the market has changed. It always has and it always will.
Some argue it’s in the trader. Only the ones who master themselves can master the charts. This also sounds convincing, and in all honesty, is true, but not because the edge is in the trader. The edge can only be exploited by the trader… assuming they have mastered themselves.
The edge has to be somewhere else.
It can’t be in risk management…
It can’t be in an indicator…
It can’t be in the trader…
So where the **** is it!?!
I have some ideas on where I believe it lurks that I will share…
But I am curious, where do YOU think the edge lies?
This is an interesting take on it. So in your eyes, the edge would be directional, meaning in certain circumstances, the price is more likely to close in one direction over another?
If this is correct, where would you look for this?
My first thought on where would be the first place to look would be the directional closes of candles.
As your samples increase, though, the numbers converge to 50% in my experience so I am curious to hear more on the matter.
Let me clarify. I specifically mean, the edge at the highest level.
Think of a roulette wheel. The edge at the highest level is the 0 and 00 squares on the wheel. These 2 squares change the game from having even odds (50/50 - the baseline of a fair game) to giving the casino a roughly 2% edge (shifts to 48/50).
So where do the odds shift in forex prices and their distributions?
Yes, as without a fundamental advantage in selecting the direction of a trade, there would be only a random chance at best of making a profit.
I look for evidence of directional continuation, which is to say trends to follow. The most probable next thing price in a trend can do is to continue to move in the trend’s direction.
Many successful traders and almost all new traders take an opposing view for various reasons, they look to make profits from a change in price’s direction. But this is based on financial fear, not TA. They fear being in the market for a prolonged period of time, they want to make profit in a trade quickly so they can exit soon.
I have a trending system that is profitable, based on Ichimoku which has stood the test of time, and T/P placement. When I place an order, I follow the exact process for every trade, and providing my mindset is detached from the acceptance of emotional responses (ZEN) that is MY edge.
And you will find many successful traders that have their own edge - there’s not a ‘one cap fits all’ edge, and never will be.
Is there ANY discrection in your decision process? ¨Well, my strategy says to wait for ABC, and this signal kinda looks like ABC…It’s worth the risk, I’ll take the trade.¨
Does this ever happen to you? Or is your strategy based on a number? ¨My strategy says to wait for XYZ to pass 35. It has not passed 35, so I will wait…Oh ok. Today, it has passed 35, so I’ll trade.¨
I think the Edge is a successful style of trading which is in harmony, rather than in conflict with, your own unique psychological make-up. You din’t like stops? Take out stops. 5M charts make you anxious? Don’t trade those. I take the position that you cannot fundamentally change your emotions and it is painful to ignore them. The important thing is to identify your own weeknesses and find a work-around. For example, if you get anxious wayching the charts after placing a trade so you keep selling too early, part of your edge moght be switching off the screen and doimg something calmimg instead.
I agree, @tommor gave an excellent answer. I think that everyone’s trading edge will be different though. It’s how they make profit where others fail. I don’t think it’s the same as strategy, cos we all know all of the different strategies by now and still lose money.
There is a red line discrection in my positive probability process, mainly depending on what chart line up is favoured. Otherwise, strict, which reduces my trade numbers.
congrates ,you’ve been out of the loop,but you still have miles to go.so let me give you little help here:
the one and only edge you would found is: THE PRICE ITSELF.
it’s not price action,not technical not fundamental ,not anything with speculation ,don’t fall back to the vicious loop you just got out,focus on price ,the only thing that 100% reliable ,that’s a lot of message you can read from the price itself,try before you ask furthur.
how do i know ive found the right answer? you will figure out why this forex game is designed that way,why leverage?why the demical in price ,why all these trading education exist,all the answer lied here.
It’s understandable when people start they are very eager and full of enthusiasm, a thirst for knowledge .Though trading can be very boring at times and a waiting game, like a fisherman waiting for a bite
Thanks for explaining! This makes a lot of sense to me and is pretty close to how I see the market too.
I agree the direction is 50/50 and that continuation is where profits can be made. I would also go as far as to say that pricing is most probable to continue not because of a directional bias, but because of how prices are distributed.
I guess you could call it that but what I think edge better describes it.
To expand upon the definition, where is something that doesn’t behave as expected that we can take advantage of? Referring back to the roulette wheel, without the 0 and 00 squares, the odds are all normal and behave as expected in a random process, meaning no edge is present.
Going dig into details on this later today once I get a bit more time to sit down.
