What is the “edge” you have in the markets?

We know how an “edge” is important to succeed in business in life. Extending this concept to markets, what ” market edge” do you have? Do you really know your competition? Do you know which sharks are there to take your money away?

First for short term traders-Do you know whom you are competing with? You are competing with quant focussed hedge funds who only hire PHDs in Nuclear Physics,Maths etc. And most of their trading is algorithmic and automated,which means by the time you decide to buy/sell,the computers might have already decided something which is going to go against you!They have got all the money, resources and talent to suck money out of the market.

To accompany these hedge fund folks are the investment banks which have all the insider information about companies in the world because of their existing relationship with these guys.

Do you really feel you are smart enough to beat these guys on short term trading? And you felt that making money on short term is so easy?

It makes me wonder how people spend countless days and hours working on building and maintaining edges in their profession, they never try to acquire an “edge” before they enter the market. If you feel you watch CNBC and NDTV profit, so you have an edge-so does your neighbour. Infact he doesn’t even understand English so he watches the ‘Hindi” version!

If you feel, you read 10 magazines that gives you the edge, so do others!Anything available in public domain usually doesn’t give you any “edge”.

Do you have a systematic “method” of investing ? Have you clearly defined that “method”?Have you clearly tested that method?Does that “edge” work in all market conditions?
Do you know your return target ? Do you understand risk?

If you have not thought of any of things above, then market is more like a “casino” to you.And you might fall in the category of “gambler” and all of us know how gamblers win big time only to lose bigger the next time!

The intention of asking these questions is not to scare you or anything but tell you that “Investing/Trading” business is not “that easy” as it “looks”! Much beyond the buy and sell equation.

So what can an individual investor do?

I always seek “expert” opinion on subjects I do not know about. Someone’s whose knowledge I can trust. Sometimes it is from friends and sometimes paid.It keeps me on the right track and saves me time.

So if you feel you are not an “expert”but want to grow your wealth, you take other’s help. If you real passion for this field and have the time and energy, you can start doing your own research.

As an individual investor you might require tools or support that can help you have an edge.

Despite all this,if you are fond of shooting in the dark, then keep on trying your “luck” in the markets. Keep on looking for “hot tips”!

But remember in markets,there are no free lunches. So whether we are investing 50,000 or 5 lakhs , the rules are the same.Markets punishes us badly if we have not done our homework well.

- SAGECAPITAL

Never sharks have eaten my money.If I call someone else a shark,who won the bucks from my trade,then in the same way I will also be called a shark when I win a trade against somebody else.
And don't bother about the hedge funds or mutual funds or rakesh jhunjhunwala's funds......How many hedge funds make money at all? Understanding Quantitive finance is fine.I like it personally.But the dumbs have also earned fortunes in the markets and the greatest of Scientists,Isaac,lost.The reason is in lack of understanding of markets' working.It has not changed in 1929 to 2008.......to me the knowledge of 'why' is the edge and everything else will follow.

I think if you read "Market Wizards" book you will come to know how many hedge funds are earning money in all market conditions. Don't worry about the hedge funds which are coming in the news.

How can you call a person "dumb" if he has made a fortune in the market?? What is your criteria for dumb in markets? And how can you compare Isaac's knowledge in science to the knowledge in markets?

So my posts addresses the same thing. If you do not know "what" edge you have in the markets then you do not have an edge. When you are saying "why" you too mean the same.

So do not post something just for the sake of posting.

- SAGECAPITAL

I know now what to say when one really doesn't have an edge - Just say Discipline & Money Management is my edge.

Discipline & Money Management is my edge.

Victim of the myth?
http://www.usatoday.com/money/perfi/...ver-usat_x.htm

I hope u understand the difference between making money,losing money and break even.Losing money is like thundering for a fund and it's 20% of the funds,who have swiss-based banks,among 650,who lost money,in 2006.
"Hedge funds that specialize in Japanese stocks have been hurt most — 31 of the 40 funds are in the red, including a 30% drop in the Whitney Japan Select Fund. " Can one believe it? Who cares?

For those who don't want to go through the full report,some excerpts:

.

Some quants' reports on 2007.
http://web.mit.edu/alo/www/Papers/august07_2.pdf

OK.Let Greg N. Gregoriou make u understand statistically:

http://books.google.co.in/books?id=e...hl=en#PPA40,M1
.

A person in real life may be a 10th pass out,may be some one who knows nothing of any technical analysis or stochastic calculus or fractals,she might have messed it up on the grossary shop of her family,a failure of others' mundane beliefs,but no hindrance in becoming a singer of excellence(Sunidhi Chauhan of this era),likewise a failure in most walks of life,in mundane terms:dumb,can excell in financial markets.I learnt from my teacher,that one of the five co-founders of NSE,was such a person who knew apparently zero of our technicals,but applied the same supremacy in handling market movements.Sultan Khan in chess.....rare or no castling,still a fantastic player of the past.The key was his understanding of the game.So is with other fields.
Isaac was more than enough not to qualify as a dumb,still he lost it in the markets,bcz he failed to understand market's working.That's it.

No Sir.Ur 'what' and my 'why' has a huge difference.Few times back,I was in conversation with my maternal uncle who looks to the credit derivative market trading in HSBC,about quantitative finance.When talking about stochastic calculus,he reminded me that the conception is important,not the mathematical models.Physics,u have to understand the nuances and clear the conception first,otherwise u can't solve the problems at the IIT levels.U talked about the methods of trading,understanding risk etc.,I am talking about the understanding of the market structure first,which needs a great deal of hard work,not just back testing of a method of buys and shorts and position sizing.One trading system may fail in the future if it's not based of sound market-understanding.My 'why' is far reaching,which took a great deal of energy and time to figure out,thanks to the Almighty.
Thanks for the advice,surya.No hard feeling,ur post was fine also in it's own credential.May be u didn't understand what I intended to say.Hope u will not complain this time.Chill.

Hi I daytrade NASDAQ and NYSE futures.

Well i dont bother what reports say I am just bothered about my trading. In august 2007 when so many quant funds lost money was the best month I have so far seen in my trading carreer not just for but for my circle of daytrader friends as well.
And the last mnth feb, was exceptionally tough in my equity graph... i was a little below breakeven. That was just bcoz of the internet cable problem... the quotes were not realtime.... delayed by 5-10 seconds during volatile movements.
On an average mnth I loose 17% of my profits on slippage alone... in Feb i lost as much 55%. All this helluva slippage is being caused by automated executions... where a second delay in hitting the orders may let u miss ur trade.

I do not know how pronounced the effect is on NSE but NASDAQ and NYSE are changing character every 4 mnths and there have been many many daytraders blown out in the last 3 mnths alone. Rest who survived like me are burning the midnight lamp to rebuild edge.

those are the words I love to hear time and again.... unfortunately neglected by many.

Very interesting & profound discussion going on here... may I seek the experts opinion on how do you define "market structure".. TQ very much in advance for your advice...

I am unable to understand the point of difference between 2 very insight full Post.


Until one understands the Conceptual part,how can he/she Design.

Quants are vulnerable,like all of us,that does not deter me for my Quest rather gives me more impetus to Excell.


http://www.traderji.com/112869-post1.html