Tuesday, November 25, 2014

Some thoughts on having an edge

Driving down the road I was pondering having an edge in the markets.  I've seen some discussions on the net about a trading edge, how it is needed.  Many involved in the market seem to want a fast buck on a fast trade.  They seek out an edge to turn this profit, exploiting some weakness or vulnerability.  These edges seem to come from many angles:
superior technology such as HFT frontrunning
pattern analysis
fundamental analysis
trading based upon indicators of which there are many
a feel/intuition/gut
cutting losses and riding winners
trend trading
and I suspect the list gets ever more complicated

What is my edge?  To begin with I accept the short term trading is unprofitable, unhealthy, and/or very difficult.  Then, factor in that I do not need the money so pressure is very low.  The big factor in my edge is that is does not disappear or change over time.  Any regular short term edge will be found and used such that it disappears.  My edge is patience.  My edge is that great growth companies grow and change the world.  Having an IPO to grow the business makes sense (kind of like hey gang we have this great idea but need money to get it off the ground).  My edge comes in learning about the management of a company over time, learning the business plan.  My edge is not (for the most part) succumbing to emotion.  My edge comes from following FIDO and perhaps Lord Abbott.  My edge comes from not investing in what I can't understand.  My edge comes from reading everything about a company (how many retail investors have read an S-1?).  My edge comes from leaning into mistakes, learning from them.  My edge comes from an investing plan and regularly reviewing IPOs.  My edge comes from knowing that the market is not fair, we can't all win, knowing it is zero sum.  My edge comes from trying to know who is on the other side of the trade.  My edge comes from critical analysis of others and trying my best to trust nobody.  My edge comes from focusing on results, not creative writing.

My edge comes from wanting it more and working harder.

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