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What is an edge?

So what is a researched EDGE and why is it important to have one when trading and investing?

An edge is a researched set of entry and exit criteria that deliver profit trades that are sufficiently large enough to cover costs and loss trades over a large number of trading events.

The biggest strength of deploying an edge when trading the market is not the edge itself; it is the processes that define executing the edge which keep you on the path and reactive to the rules that define the edge. Focus on your processes and the outcomes will take care of themselves. Change your focus to the outcomes and your processes will inevitably break down which will lead to worse outcomes than you otherwise would have had.

Most technical analysts are on a quest to find the ‘best’ edge. Just as a carpenter sees things in terms of a hammer and nails, an analyst’s paradigm is that of technical indicators. The trader’s paradigm is that of executing trades according to their edge. The trader’s aim is NOT to find the BEST edge – it is to discover an edge and use it to engage the game by risking capital to make profits – a trader trades, an analyst analyses.

The BEST edge will NEVER be found. The BEST edge is perfection, 100% winners, which does not and never will exist (unless you do 1 trade, win and never trade again – but this defeats the object of risking capital to make profits unless you bet the house and ….. tempting!?). There will always be a better edge than the one you are using, either existing and in use somewhere on the planet or yet to be discovered. You will be further ahead in the long haul by engaging the game according to a set of researched criteria rather than being out of the game spectating and searching for the ‘best edge’.

My message is: find, through your own research or otherwise, a credible proven edge, engage the game and get on with honing the remaining parts of the ‘trading formula’ before time passes you by as you perfect the skills of a spectator.

The fact is that well below perfection is OK to make money, and lots of it. Simple arithmetic proves this to us. Execution of that arithmetic has proved this to me personally and many of my customers over many years now. It is the understanding of not to have to be right, what probabilities are good enough to make good profits and what an edge is.

SPA3 has been researched and designed to give users an EDGE in the market. The researched edge dictates that if the process and rules of the system are followed, over a large sample of trades, the user should outperform the market indices, that is, beat the market and hence alternative investment avenues that only match the market, like the majority of managed funds.


  • Ray Hazelhurst says:

    Thanks Gary. What you say is so right. Without an edge Trading is gambling. We need an Edge to enter a trade and the edge needs to be in place throughout the trade. When the Edge goes it is time to get out. Quickly.

    Trading is a numbers game and an Edge is fundamental to how we play the game.

    Thanks for your e-mails. They are good stuff.

  • Stephen K says:

    Hi Gary

    Yes an EDGE is; I think one of the three most important things in profitable trading. In Chris Tate’s book “The Art Of Trading” he says; “If you do not know what your edge is then you do not have one. If you don’t have one then don’t trade.”

    Also Gary, it might be handy for others if you could post the section from the old discovery DVD that also explains the maths of an edge and why it works.

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