Edge
Also known as: statistical edge, trading edge, advantage
Edge is the measurable positive expected value a trader earns per trade, after costs, that comes from any repeatable advantage in setup selection, execution, or risk management.
Edge is the difference between trading and gambling. A trader with edge wins, on average, more than they lose per trade over a large enough sample; a trader without edge loses, on average, the size of their costs (spread, commissions, slippage). Most retail traders do not have edge and survive in the market only as long as their bankroll, which is why the survival rate over five years is poor.
Edge is measurable. Compute the expectancy of every trade you have taken in a defined window. If it is positive after costs, you have something. The harder question is whether the edge is durable: did it come from a structural feature of the market that persists, or from a regime that will end? The second-order discipline is to keep measuring and to stop trading the setup the day the measurement turns negative.
The most common mistake is confusing edge with skill at a recent string of winners. Edge is a property of a distribution, not of a streak.
Expectancy per trade (positive after costs); stability of that expectancy across non-overlapping windows.
Implied by Expectancy and Profit Factor on the diagnosis.
Related terms
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