An Edge, Defined
When we speak of an "edge", we are speaking of mathmatical expectation. An edge can be defined as the probability of a certain outcome. We can never be certain of any outcome, but we can understand its probability. An edge, then, means that your average profits exceed average losses. To have an edge requires a postive expectancy. The equation is:
Percent profits (amount of profit) - percent of losers (amount lost when you lose).
In order to have an edge, or an advantage, you must have a postive expectation. That is, you must have an asymmetric imbalance between the average profit and average loss.
Many traders/portfolio managers who don't have an edge may be too focused on trying to make all their trades a profit and/or avoiding any losers at all, which is impossible, rather than focusing on creating larger average profits than average losses.
