Uploaded January 2020 | Updated September 2026, 22 minutes ago
Time and time again, you come across the term "alpha" when visiting investing or trading-related websites... or, of course, variations thereof, such as edge, excess return or abnormal rate of return.
But has everyone ever explained to you, in plain English, what the alpha or edge of a trader actually represents?
This video does just that, in one minute of course!
Let's just say that in the absence of an edge that enables you to somehow beat the market, investing and/or trading yourself isn't exactly the wisest approach, since you are better off simply choosing a product such as an index fund that tracks the market.
That way, if the market goes up by x%, the investor/trader without an edge who would have had a negative alpha also sees his/her portfolio when it comes to the market in question go up by x%.
It has become a well-known fact that most investors who pick assets themselves end up performing sub-optimally, let's not even talk about traders without an edge who oftentimes lose their entire investment due to mistakes such as improper use of leverage.
The bottom line is this: without an edge, you're better off following the market through specialized products and not actively investing/trading.
Time and time again, you come across the term "alpha" when visiting investing or trading-related websites... or, of course, variations thereof, such as edge, excess return or abnormal rate of return.
But has everyone ever explained to you, in plain English, what the alpha or edge of a trader actually represents?
This video does just that, in one minute of course!
Let's just say that in the absence of an edge that enables you to somehow beat the market, investing and/or trading yourself isn't exactly the wisest approach, since you are better off simply choosing a product such as an index fund that tracks the market.
That way, if the market goes up by x%, the investor/trader without an edge who would have had a negative alpha also sees his/her portfolio when it comes to the market in question go up by x%.
It has become a well-known fact that most investors who pick assets themselves end up performing sub-optimally, let's not even talk about traders without an edge who oftentimes lose their entire investment due to mistakes such as improper use of leverage.
The bottom line is this: without an edge, you're better off following the market through specialized products and not actively investing/trading.
