Competitive Edge

"Challenges are what make life interesting; overcoming them is what makes life meaningful. - Joshua J. Marine

Is having an edge that important to a trader?

What's your edge in trading? A question I asked many traders.

Unfortunately, most traders don't even know or understand why having an edge is so important to their success. Those who make good money consistently obviously know subconsciously what their edge is even though they might not have given much thought about it.

As a scalper and spreader, speed in trade execution is one of the most important factor contribution to my success, I need fast reliable Internet speed and a good trading platform. It gives me the confidence, which is a very important psychological booster to any trader.

With the advance in technology, I'm losing this edge to the Algos and the big boys who can afford superfast supercomputer such as the "Roadrunner" by IBM introduced in 2008. It operates one petaflop per second or one thousand trillion calculations per second! Unbelievable!

How fast is a petaflop? That's roughly equivalent to the combined computing power of 100,000 of today's fastest laptop computers. You would need a stack of laptops 1.5 miles high to equal Roadrunner's performance.

It would take the entire population of the earth - about six billion - each of us working a handheld calculator at the rate of one second per calculation, more than 46 years to do what Roadrunner can do in one day.

I heard from those AFACT members who have recently attended the Algo course about the amazing speed in execution by the RTD Tango Algo platform, more than 600 lots executed within seconds with a default of only 1 lot. There's no way we human can compete with the machine, it's probably 100 times faster than what we can click with our mouse.

Does that mean that we traders especially the scalpers and spreaders cannot make a living from trading?

Of course I don't think so, we now know our competitors, we need to take steps to change our strategies, probably taking more risk and working harder for our money. There are still plenty of day traders and position traders putting in sitting duck orders for their trades to be filled.

We must be ready for the challenges ahead against the big boys who can afford the fastest machines and the best programmers. List the the various factors that together contribute to be our competitive edge and work on it.

For traders who don't know what is their edge, the trades they put in have only 50% chance of making money. It becomes a gamble. I suppose many are in this category of struggling to survive, can't make enough to cover expenses. Over time they become demoralise and throw in the tower, what a waste.