Is trading always a zero sum game

rvsw

New Member
#1
This is a basic question and I thought it would have been discussed within the forums but after more than 20 minutes of searching I have not been able to find any related discussion so summoning up the courage to ask this basic question. Is trading always a 0 sum game? In other words, as an individual trader, is my real goal to outsmart the person at the other end of the trade?

From what I understand, long-term investing is not a zero-sum game because ultimately the companies that one invests in will produce goods or services of value and that will increase their stock price intrinsically.

But I'm not sure about frequent trading or day trading? Click put in to
 
#2
Yes my friend,It is a zero sum game.Even Investing is also zero sum game because for every buyer there is a seller.If stock does well over a period of time then it's seller's lost opportunity that he missed his profits making investment or If prices crashed he is in virtual profits which saved his account.
 

rvsw

New Member
#4
Thank you for your responses. So then is it fair to say that when I am learning trading, I'm basically trying to learn how to outsmart other people.

This is what I have a hard time understanding. Let's say there are hundred people in the entire stock market. If all hundred try the same strategy, then it becomes worthless. So ultimately the winners have to come up with some confidential strategy of their own. And it is then a never-ending game because people will keep on innovating and it is essentially trying to beat each other.

Yes investing can also be considered as a zero-sum game as has been explained in one of the responses. the same time, I understand it more as a way of lending your capital with the risk and hoping that someone else is able to make a better value out of that. In contrast, in the trading, it seems to me that we are just trying to exchange money between each other and the smarter and lucky person will get money from the less fortunate person.
 

vijkris

Learner and Follower
#5
Thank you for your responses. So then is it fair to say that when I am learning trading, I'm basically trying to learn how to outsmart other people.

This is what I have a hard time understanding. Let's say there are hundred people in the entire stock market. If all hundred try the same strategy, then it becomes worthless. So ultimately the winners have to come up with some confidential strategy of their own. And it is then a never-ending game because people will keep on innovating and it is essentially trying to beat each other.

Yes investing can also be considered as a zero-sum game as has been explained in one of the responses. the same time, I understand it more as a way of lending your capital with the risk and hoping that someone else is able to make a better value out of that. In contrast, in the trading, it seems to me that we are just trying to exchange money between each other and the smarter and lucky person will get money from the less fortunate person.
Say 100 people in the entire stock market following same strategy. Buy signal came. All of them punched buy order. None of the buy order gets executed.
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Because there will be no sellers. :lol::lol::lol::D
 

suri112000

Well-Known Member
#7
Money flows from weak investments to strong investments. Here weak and strong terms are used in terms of maximum return generating avenues.

The process of trading and investing involves moving of funds from weak areas to strong areas.

Here comes the skill of a trader or investor.

The man who smells weakness in the current instrument first and gets out fast is the winner.

The man who smells strength in other instruments first and gets out of present investment very fast is the winner.

The man who smells strength in other instruments first and change his course from present investment to strong instruments fast is the winner.

This is a very big analogy which I tried to condense into three sentences.

Withdrawing funds or changing of funds from one avenue to another is a matter of speed and predicting accuracy. No two individuals in the market match these skills.

This is the reason why you find lot of liquidity in the markets. For every buyer there is a seller.

Trading or investing is not a zero sum game as many think. Money is flowing from weak hands to strong hands seamlessly. The lure of making a big money overnight has always pulled many loosers here in the past, at the present and it will be in the future.

Read through these few lines with open mind. If you didnot understand it in the first attempt, come back with a fresh mind.... you will get the true nature of markets.
 
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travi

Well-Known Member
#8
*Zero sum game maybe yes, but announce for a debate and you'll never get all hundred to agree on the same thing.
In fact, never in history, did everyone agree on one thing.

Its that human nature that keeps it running :D

*Zero sum would be ideal if the taxes weren't levied.
One mans gain isn't another man's equal loss :rofl::rofl:
Rather an unfair game, bcos whether you win or loss a trade, someone earns.
(Just a joke, there economics behind the taxes)
 
#9
Trading is the transfer of money from weak hands(amatures)to strong hands(hedge funds,Foreign Institutional traders,market makers ,professional traders.).They have large
funds and most of them use Aglo programs for trading.Newbies are under captilised and thus they cannot trade in the higher time frames and will lose money!
 

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