Boris Schlossberg
BKTraders and Prop Traders Edge
It’s amazing how much time we all spend looking for new setups when none of them really matter in the end because there is no such thing as a trading edge.
Oh I know I know. You’ve watched thousands of YouTube videos, you’ve listened to hundreds of podcasts, you’ve read multiple books on trading where everyone talks about “edge”. They use fancy words and even fancier math to sift through centuries of data to find the “perfect” strategies. It would be highly amusing if it wasn’t so tragic.
Ask Andrew Lo, famed professor of MIT who certainly knows more math than all of us combined how his vaunted “Behavioral Finance” strategy is doing. (Hint: Your Bank CD at 10 basis per year - yes 0.1% per year - would have done a better job over the past 5 years).
Or maybe you want to consult Cliff Asness who after all went to Wharton and Chicago and has a Phd and worked for Goldman Sachs Asset Management and was so absolutely certain that the value factor was the way to invest and then proceeded to bleed out a decade of underperformance which cost investors billions upon billions of dollars.
These very smart, very talented people. I am not dunking in them. I am just pointing out the futility of believing in the concept of edge.
Edge doesn’t exist. What we call edge is just the process of being at the right place at the right time. It is that perfect moment when your strategy aligns with the current market conditions but it is ALWAYS temporary.
If you were an orange juice trader ( yes just like in Trading Places ) there was one price pattern you could always count on. Prices went down in the winter when Florida flooded the market with their harvest and then rose in the summer when supply dried up.
That worked like clockwork until the mid 80s when Brazil decided to get into the orange juice game.
Because Brazil is in the Southern Hemisphere the supply curve flipped on its head. Suddenly summer OJ prices plummeted and all those carefully constructed seasonal spreads blew up.
So much for your edge.
There are and always will be just two strategies in the market - Continuation and Reversal.
If the market is in continuation mode the stupidest, simplest moving average crossover strategy will make you millions.
If the market is range bound then Bollinger Bands, RSI, Stochastics, MACD - ANYTHING will catch every turn and make you look like a trading genius.
Don’t be fooled. You ain't that smart. You are just lucky.
But that is exactly the point. Our whole job as traders is to just ride that tidal wave of luck while keeping our hubris in check.
Past performance is not indicative of future results. Trading forex carries a high level of risk, and may not be suitable for all investors. The high degree of leverage can work against you as well as for you. Before deciding to trade any such leveraged products, you should carefully consider your investment objectives, level of experience, and risk appetite. The possibility exists that you could sustain a loss of some or all of your initial investment and therefore you should not invest money that you cannot afford to lose. You should be aware of all the risks associated with trading on margin, and seek advice from an independent financial advisor if you have any doubts.
Editors’ Picks
EUR/USD: US Dollar to remain pressured until uncertainty fog dissipates
Unimpressive European Central Bank left monetary policy unchanged for the fifth consecutive meeting. The United States first-tier employment and inflation data is scheduled for the second week of February. EUR/USD battles to remain afloat above 1.1800, sellers moving to the sidelines.
GBP/USD softens to near 1.3600 as BoE hints further rate cuts
The GBP/USD pair loses ground to near 1.3610 during the early Asian session on Monday. The Pound Sterling softens against the Greenback amid growing expectations of the Bank of England’s interest-rate cut. Traders will take more cues from the Fedspeak later on Monday.
USD/JPY drops back below 157.00 on Japan's verbal intervention
USD/JPY has come under moderate selling pressure below 157.00 in the Asian session on Monday. The Japanese Yen lost ground to near 157.70 following Japan’s ruling Liberal Democratic Party's outright majority win in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi. However, JPY buyers jumped back and dragged the pair southward on FX verbal intervention by Japan’s Finance Minister Katayama.
Editors’ Picks
USD/JPY drops back below 157.00 on Japan's verbal intervention
USD/JPY has come under moderate selling pressure below 157.00 in the Asian session on Monday. The Japanese Yen lost ground to near 157.70 following Japan’s ruling Liberal Democratic Party's outright majority win in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi. However, JPY buyers jumped back and dragged the pair southward on FX verbal intervention by Japan’s Finance Minister Katayama.
Gold holds gains near $5,000 as China's gold buying drives demand
Gold price clings to the latest uptick near $5,000 in Asian trading on Monday. The precious metal holds its recovery amid a weaker US Dollar and rising demand from the Chinese central bank. The delayed release of the US employment report for January will be in the spotlight later this week.
AUD/USD: Buyers eyes 0.7050 amid upbeat mood
AUD/USD builds on Friday's goodish rebound from sub-0.6900 levels and kicks off the new week on a positive note, with bulls awaiting a sustained move and acceptance above mid-0.7000s before placing fresh bets. The widening RBA-Fed divergence, along with the upbeat market mood, acts as a tailwind for the risk-sensitive Aussie amid some follow-through US Dollar selling for the second straight day.
Bitcoin Weekly Forecast: The worst may be behind us
Bitcoin price recovers slightly, trading at $65,000 at the time of writing on Friday, after reaching a low of $60,000 during the early Asian trading session. The Crypto King remained under pressure so far this week, posting three consecutive weeks of losses exceeding 30%.
Weekly column: Saturn-Neptune and the end of the Dollar’s 15-year bull cycle
Tariffs are not only inflationary for a nation but also risk undermining the trust and credibility that go hand in hand with the responsibility of being the leading nation in the free world and controlling the world’s reserve currency.
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