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 reclaims 1.3600 and above
GBP/USD reverses two straight days of losses, surpassing the key 1.3600 yardstick on Friday. Cable’s rebound comes as the Greenback slips away from two-week highs in response to some profit-taking mood and speculation of Fed rate cuts. In addition, hawkish comments from the BoE’s Pill are also collaborating with the quid’s improvement.
USD/JPY gathers strength to near 157.50 as Takaichi’s party wins snap elections
The USD/JPY pair attracts some buyers to around 157.45 during the early Asian session on Monday. The Japanese Yen weakens against the US Dollar after Japan’s ruling Liberal Democratic Party won an outright majority in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi.
Editors’ Picks
USD/JPY gathers strength to near 157.50 as Takaichi’s party wins snap elections
The USD/JPY pair attracts some buyers to around 157.45 during the early Asian session on Monday. The Japanese Yen weakens against the US Dollar after Japan’s ruling Liberal Democratic Party won an outright majority in Sunday’s lower house election, opening the door to more fiscal stimulus by Prime Minister Sanae Takaichi.
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.
Gold: Volatility persists in commodity space
After losing more than 8% to end the previous week, Gold remained under heavy selling pressure on Monday and dropped toward $4,400. Although XAU/USD staged a decisive rebound afterward, it failed to stabilize above $5,000. The US economic calendar will feature Nonfarm Payrolls and Consumer Price Index data for January, which could influence the market pricing of the Federal Reserve’s policy outlook and impact Gold’s performance.
Week ahead: US NFP and CPI data to shake Fed cut bets, Japan election looms
US NFP and CPI data awaited after Warsh’s nomination as Fed chief. Yen traders lock gaze on Sunday’s snap election. UK and Eurozone Q4 GDP data also on the agenda. China CPI and PPI could reveal more weakness in domestic demand.
Three scenarios for Japanese Yen ahead of snap election Premium
The latest polls point to a dominant win for the ruling bloc at the upcoming Japanese snap election. The larger Sanae Takaichi’s mandate, the more investors fear faster implementation of tax cuts and spending plans.
RECOMMENDED LESSONS
Making money in forex is easy if you know how the bankers trade!
I’m often mystified in my educational forex articles why so many traders struggle to make consistent money out of forex trading. The answer has more to do with what they don’t know than what they do know. After working in investment banks for 20 years many of which were as a Chief trader its second knowledge how to extract cash out of the market.
5 Forex News Events You Need To Know
In the fast moving world of currency markets where huge moves can seemingly come from nowhere, it is extremely important for new traders to learn about the various economic indicators and forex news events and releases that shape the markets. Indeed, quickly getting a handle on which data to look out for, what it means, and how to trade it can see new traders quickly become far more profitable and sets up the road to long term success.
Top 10 Chart Patterns Every Trader Should Know
Chart patterns are one of the most effective trading tools for a trader. They are pure price-action, and form on the basis of underlying buying and selling pressure. Chart patterns have a proven track-record, and traders use them to identify continuation or reversal signals, to open positions and identify price targets.
7 Ways to Avoid Forex Scams
The forex industry is recently seeing more and more scams. Here are 7 ways to avoid losing your money in such scams: Forex scams are becoming frequent. Michael Greenberg reports on luxurious expenses, including a submarine bought from the money taken from forex traders. Here’s another report of a forex fraud. So, how can we avoid falling in such forex scams?
What Are the 10 Fatal Mistakes Traders Make
Trading is exciting. Trading is hard. Trading is extremely hard. Some say that it takes more than 10,000 hours to master. Others believe that trading is the way to quick riches. They might be both wrong. What is important to know that no matter how experienced you are, mistakes will be part of the trading process.
The challenge: Timing the market and trader psychology
Successful trading often comes down to timing – entering and exiting trades at the right moments. Yet timing the market is notoriously difficult, largely because human psychology can derail even the best plans. Two powerful emotions in particular – fear and greed – tend to drive trading decisions off course.