TS how does one effectively measure what his edge his? I don't think anyone can know with a high degree of certainty what his edge is.

Yahoo is finally rewarding me. But my NQ_F long today rewarded me more =/

What sort of strategy are you using?

(never mind if you are just following along)

No position, however SVXY XIV show you the return some smart traders have made. Good hedges on short positions anyways so I assume that's where a lot of the volume has gone.

You know what else is a bitch?

bahh.. took an ugly loss on hpq.. had a bunch of contracts , should have gone with my gut and sold when I was planning to.. bad trade.

GMCR WOW!!!

i guess all internet co's are undervalued ..


http://finance.yahoo.com/news/uber-s...170000527.html

Wow is right. I was long it a while back (sold covered calls and it skyrocketed and got called away and I cried about it) and was actually thinking of shorting it this week.

Which is exactly why I should never short anything... I shouldn't even think about shorting anything.

use 1/2 position size next week until you get back on your groove. This week, especially the latter half, have been dry, I've also been a victim of forcing a few trades.

dude I lost twice tryin gto short that today, got my ass squeezed. Went in small too that **** just ripped through the roof!

apparently some deal with WMT (walmart) but its not verified, either way will be a fun trader come Monday (hopefully to teh shortside).

If it runs, I'll take a look at $JVA as well, low float coffee stock that may run on momo

50,000 September $17, 52,000 $18 calls traded hands today on Ford. That is a **** load, hope you guys have been buying.

That's precisely my point. What I'm trying to say to BB comes down to this:

1. You can't know what your edge is more than very roughly. Hence the small edges could easily be negative, especially when you factor in things like tilt, tired days, various mental flaws like confirmation bias.

2. You should be able to spot where one edge is likely much bigger than another (or else you shouldn't be trading as you have no talent).

There aren't 20 good edges a day in the market for multi day trading for a single investor. There just aren't. There aren't even 5. Trading 20/day means you're taking lots of spots where you don't know if you have an edge. That's just asking to lose money. You also bombard yourself with so many things to keep track of, there's no way you're making decisions well. We're not built to multitask, and trading requires a lot more intelligence/rationality/focus than poker to maintain an edge.

Just posting to say that tooth is dead wrong. It depends on what you trade and what your strategy is. Making 20 trades a day does not in any way mean you don't know if you even have an edge on the trades, and nor should the human brain's capability even be included this debate. Just because a trade might be less profitable than another one doesn't mean you should just ignore it when you can just as easily do both.

100% agree with RaineTech here. Tooth I have to strongly disagree with you. Overtrading is okay as long as you're making money.
I know of MANY professional daytraders who easily do 50+ tickets a day. A couple years ago I was doing at least 35-40 tickets a day. Nowadays half that amount but then again it depends on what the market has to offer. A few years ago there was definitely more opportunity on a hour by hour, minute by minute basis.

You can trade many different edges, everyone trades on their own timeframes (short term 1min, long term hourly etc...). Some people are just classic overtraders, I used to be one of them, and its okay as long as you're profitable. It all depends on your own persoanlity and style that makes you an overtrader or not. My mentor still til this day overtrades and while I dont agree with some of his trades, he cuts his losses short and he's still a better trader than me by a long shot.

Raintech or leeboa please share how you guys calculate what your edge is for any given trade you put on.


Also just to clarify you both read that BB is a multi day trader puting on 20 trades a day and think that he can still have an edge in each of those trades?

Yeah I think BB is fairly low frequency but that's aside the point. Most trades are kind of an educated guess as to whether it's +ev but some trades are very quantifiable. If you've got a strategy that trades a very specific set up historical performance can be a very good estimate of EV.

First of all, I primarily trade futures and so 20 trades a day in these is different than 20 trades in equities. If I get 20 trades in a day, its because I found that many profitable setups to take. If I get 40 in a day, that may or may not be an even better day (they could be 40 less profitable setups than a day with 20 more profitable ones or vice versa.) Sometimes I just sit there and watch all the contracts I trade which are ES, NQ, CL, NG, GC, 6E, 6J and occasionally SPI at 8 PM ET when it's predictably lagging what just happened in the US and/or how the US reacted to china data (SPI is the Australian S&P future and their economy largely mimics the strength and weakness of their largest exporting trade partner, china, as well as the increase or decrease in price or supply of their largest natural resource and economic driving commodity, iron.) If I just sit there and watch all day long, only to find 2 setups that I believe to be profitable, which has happened, then so be it. I do not force trades, just like I shouldn't just ignore trades because I am worried about my "trade count." It's a game of discipline and patience, which is why I completely disagree with the massive generalization of tooth's opinion as if his own inability to do this means nobody else can.

That said I will state 2 other things:

#1. Assuming the trade is not an arbitrage situation, which of course can arise, there is no way anyone can calculate their exact "edge" on each individual trade. However after your strategy is devised all you can do is analyze the relevant set of incomplete information in front of you (which differs from person to person as people will use as much or as little data as their strategy dictates) and try to assemble the most optimal decision/course of action. The best someone can do is make a rough estimate on their expected value and the probability to which the trade will be profitable and adjust the risk/reward ratio they take on the trade to be in your favor. You don't necessarily need a 51% or greater probability of a winning trade for a trade to be a good decision.

To simplify an example of this I will create a basic scenario using CL_F (crude oil futures) in which we find a potential squeeze setup based on established support and resistance levels of where we may find a truckload of stops that will trigger a large and fast breakout move once hit. We can never know for sure that this will occur, we just know that through trial and error and past history/experience, the breakout has somewhere around a 25% probability of happening here. Let's say the breakout level is 102.85 and we're currently at 103. So we use our standard trade size and place a bracket order at the level in which we believe this will occur, 102.84, with a 10 tick stop loss at 102.94 and a cover target to the next support level at 102.34. The idea here is that if $102.85 is broken to $102.84, a bunch of longs with their stops at this established level will be forced to sell, and traders also looking at this level will also have all their shorts execute. 3 things can happen in this scenario. A. We leave this trade open all day and it never hits, oh well. B. The trade hits but we were wrong and get stopped out for a 10 tick loss. C. The trade hits and we were right and pick up 50 ticks. If this situation comes up 40 freakin times in a day, I'm taking it every time and won't sit there and think gee I'm overtrading today, guess I'll stop.

#2. I don't know what BB's strategy is for putting those trades on so nobody here should be able to tell whether or not he has an edge on them. Someone's strategy could be formed out of analyzing longer dated charts and looking at their current trend channels. By utilizing a large scanner of tickers he could very easily be finding ones with a history of consistently rebounding off the bottom of those channels or correcting at the tops of them. If they take multiple days to come to fruition then so be it. All I'm saying is that generalizing the # of trades someone makes a day with a specific number and claiming anything over that is not profitable or not done by some of the world's best traders in a logical and rational way is completely wrong.

What I'm saying and what TS seems to be saying is that traders overestimate their edge all the time. Nothing you said changes that.

Especially if your a swing trader putting on 20 trades a day that are gonna be +ev is almost impossible. I don't even need to know the type of strategy he's using to tell you that it's either highly correlated or just trades that don't have an edge. It's great that you gave an example I have some questions for you.

1. Have you actually done any back testing to show this trade has a 25% probability of working out?

2. If you have how does this strategy do in trending markets, how does it do in sideways markets? How do you identify what market were in?

3. How do you deal with markets changing?

The example wasn't a strategy in any way so I'm not sure what you're looking for. It was hypothetical oversimplified example to portray what I was saying. I never know an exact probability of a trade, I just look for setups based on the strategies I've learned and take them as they come. In terms of changing markets it doesn't really matter, I react based on what I see. Up, down, sideways it doesn't really matter. Trend days are traded differently and a whole host of ever changing variables cause me to react differently.

I can make 10,000 profitable trades/day using hypothetical strategies.

It's a pretty simple argument, man. You agree that some trades are better than others (else there's no point to trading). You agree that the more +EV trades are rarer than the less +EV trades (this is just simple math). It therefore makes zero sense to take lots of the less +EV trades unless they're

a) reliable and
b) extremely short duration and
c) not correlated and
d) repeated many times.

Clearly (a) is wrong, or you'd be millionaires rather than having piddly accounts.
(b) doesn't apply to BB's trades, which are multi day
(c) doesn't apply to holding 5+ equities.

Add in the fact that you lose focus and awareness for 5+ holdings (things which reduce your edge), and it makes no sense to trade so much. This isn't poker where bet sizes are capped or higher stakes get harder, so multi-tabling makes sense. You can bet your entire bankroll on any trade at any time for <$100K bankrolls. Trading is also not a game where you can be sure of your edge like you can in poker; there's far more noise as well as substantial unpredictable environmental changes that can make any borderline strategy -EV long before you realize and accept that it's no longer working.

Tooth, buddy, we just disagree. You lost my credibility when you said this isn't poker which is something we are all aware of. It seems most people disagree with you here and I'm sure you're an excellent trader but it seems pointless for all of us to sit here and argue with you. Trade what works for you, add your own insight where you see fit, but it's okay to let others do what they think is best.

If you have the personality of watching the stock tick every second, then yes, it would be better if you took only the best most reliable setups, and you will find maybe a handful of those on a good day. Why? Because you'd be very comfortable taking the setups that are most reliable. It fits your personality. And by doing so, you won't be watching every tick.

That being said, you can't speak on behalf of everybody. Everybody has different personalities, and different strategies, there are 100's of edges that make one successful at this.

Hey I made a video on my thought process before I put on a trade. Keep in mind, I do all the analysis in a matter of seconds, timing is everything in this business. With experience all of this just becomes a habit and comes automatic. I hope it helps

http://screencast.com/t/DrmXZkUWHA

http://screencast.com/t/YNLqixGc