What is an Edge, and Why Does Everyone Think That They Need One?

The Popular Belief About Edges

The popular belief is that an edge is something that a trader knows or uses, that gives them an advantage over the market, or over all of the other traders. For example, a trader might believe that using a particular indicator (e.g. the Relative Strength Index) in a specific manner (e.g. making short trades when the RSI is above 84) gives them an edge over traders that are not using the same indicator in the same manner (e.g. traders that make short trades when the RSI is above 70).

Many new traders spend years (seriously, years) trying a variety of different indicators, a variety of different indicator settings (e.g. a length of 10, then a length of 15, etc.), and a variety of different chart settings (e.g. time based charts, ticks based charts, volume based charts, etc.), in an attempt to find the combination that gives them their edge.

The Truth About Edges

The truth is that there are traders who believe that they have an edge, and there are traders who believe that they need an edge and are consequently looking for one, and there are traders who laugh every time someone mentions an edge, and then make another profitable trade. In other words, there is no such thing as an edge, not over the market, and not over other traders (unless you consider having received good trading instruction as an edge :-) ).

Successful trading is not about being in competition with the market or with other traders, and quite the opposite is actually the case.

Successful trading is about being in agreement with the market, and being in agreement with other professional traders (specifically professional traders).

Many new traders will disagree with this, and if you are one of them, consider that the traders who believe that they have an edge will never tell any other traders what trade they are about to make, because by doing so they will be negating their edge.

Conversely, professional traders will tell other traders what trade they are about to make without any hesitation, because other traders knowing about the trade, or making the same trade, does not affect the potential of the trade at all.

The Never-ending Search for an Edge

If you are a new trader that is just starting the endless search for your edge, or if you are a trader that has already spent several years looking for your edge, stop doing so before you finish reading this sentence, because the search for a trading edge is as futile as the search for the holy grail of trading.