What it means
Without an edge and risk control, trading works like a casino game with the house edge against you.
In practice
An edge is something specific that can be described and measured: a particular setup, in particular conditions, that pays more than it costs across a large number of trades. Traders find one by testing and keep it by executing the same way every time.
It shows up only over many trades. Any single trade can lose, and a run of losses does not mean it has gone.
What to watch for
A handful of winning trades proves nothing. Edges are small and are easily erased by costs, by oversized positions or by breaking the rules. Markets also change, so an edge needs checking from time to time.
Related terms
3 terms- ExpectancyWhat a strategy makes per trade on average: win rate × average win − loss rate × average loss.
- BacktestingApplying exact rules to past data, trade by trade, to see whether an idea has an edge.
- Sample sizeHow many trades your conclusions rest on; under about 30 is mostly noise, aim for 50 to 100 or more.