Wednesday, December 29, 2010


What is edge?  If you are a trader than you have heard countless times you need edge.  If you new to the world of trading or have never traded here is a brief description.

Edge is the advantage that you as a trader have on the rest of the trading world.  Edge is executing your game plan and profiting in your own special way. As I like to say there are thousands of ways to trade wrong but only one way to trade right and that is to be profitable.

So now comes the million dollar question. What is my edge? I can tell you from my own experience that I have exploited many different edges through out my career.  I am going to start with my first and work my way to the current method.  When I first started out as a trader at the CME I had just one edge and that was to never trade unless I was virtually guaranteed a profit. This is how it worked.

When I started out at the CME,  there was a new product at the time in the currency quadrant, it was the Australian Dollar. To be precise the product was available to trade for a year or so before I got there, but no one could make any money in the pit because there was not enough volume to keep traders attention.  The only people really trading the product at the time were position traders and no locals could figure out a way to how to make any money making a market for the opposing position takers. My father somehow figured out an edge to trade the Aussie.  He started a arbitrage between the futures on the Australian Dollar and the cash market in the interbank market. An arbitrage is the simultaneous purchase and sale of exact or similar markets in at least two markets to exploit mispricing in one of the said markets. This arbitrage was our edge.   

In future posts I will expand on my edges I have used thru out my career.

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