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The Trade Busters
123 - First Principles: Know Your Edge
Feb 20, 2024
The podcast explores different types of trading edges including behavioral, informational, analytical, and technical. It discusses the volatility risk premium and the importance of having conviction in trading strategies. The episode also covers navigating delta neutral trading strategies and identifying your edge in the market.
13:41
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Quick takeaways
- Identifying your unique edge in trading, such as exploiting behavioral biases or utilizing alternative data sources, is crucial for sustained success.
- Understanding the volatility risk premium (VRP) as a fundamental edge, alongside other sources, helps traders avoid attributing success to random factors and focus on consistent profitability.
Deep dives
Understanding Your Edge in Trading
Trading success hinges on understanding where your edge comes from. Traders often overlook their edge, leading to strategies that may not work or difficulties during drawdowns. Michael Mobison's paper categorizes edges into behavioral, informational, analytical, and technical. Recognizing these categories can help traders identify and capitalize on their unique edge, such as exploiting behavioral biases or utilizing alternative data sources.
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Listen to the best highlights from the podcasts you love and dive into the full episode