Edge erosion

Sorry, I got the feedback from paying subs, that they want some exclusive stuff from time to time, so here we have it ;-)

Big subject on X, so here are my thoughts.

There are two kinds of edges.

I. Technical glitches —> the go away fast, algos will find out and level it out

II.

Behavioral

1.      People believe in things that are not true (for example that macro data leads the economy, that small caps are weak and untradable)

2.      People believe in the right things but cannot put on the trade because it is counterintuitive or it requires some more work, or it is simply unpopular

[Just one example: Believe me, I feel terrible that I was not in SMCI because I cannot show it off on X. But I had several > 100% trades during the last months. But they are not popular, and I cannot show them off. That kind of silence you must be able to live with trading unknown small caps. You will never be the hero ;-)]

All longer-term robust trading systems that are robust fall into the II. camp.

The more counterintuitive and hard to execute your edge is the better.

The less institutions can play your game the better.

And the more your strategy does get punished by a bad (Quad 4) market tape the better.

The more volatile the (single, not the strategy overall!) stocks of your strategy the better.

Because those facts make sure that the strategy you choose is extremely hard to execute.

Why does my edge not go away: