Factor investing basics — edges that persist

Where a day-trading setup fires over days, a factor works over months. A factor is a measurable trait of a stock — is it above its long-term trend, has it been going up, is it cheap — that history links to different forward returns.

Always read a factor as a lift

The right question is never “what’s the win rate?” in isolation, but “how much better (or worse) than the baseline — every bar, unconditioned?” A factor with a 51% hit rate is meaningless until you know the baseline was 48%. The lift is the edge.

Why factors are calmer than setups

Factor edges are smaller per-observation but far more stable, because they lean on structural behaviour (trends persist, cheap stays cheap for a while) rather than a single day’s move. That’s what makes them the backbone of a long-term, lower-churn approach.