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Strategies & Market Trends : DAYTRADING Fundamentals
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To: Jon Tara who wrote (7947)4/22/2000 10:22:00 PM
From: OZ  Read Replies (1) of 18137
 
No, this is just plain wrong. For one (equity) trader to win, it is not necessary that another trader lose. This is fundamental to a basic understanding of trading (or investing, for that matter).

Jon,

I agree that on the micro level of my individual trades, that a single winning trade is not necessarily offset by some on the other side of the trade losing money. They may be just closing out a longer held position for an even bigger winner than mine. BUT, I do believe that on the MACRO level that all the wealth created now is paid for at the expense of others now and even years down the road. It is the invisible hand of Adam Smith doing what it has always done, which is to ensure that for every action there is an equal and opposite reaction. I do not think the NASDAQ is exempt from this kind of physical law.

Sure there has been much wealth created in the last several years. Probably even more created than has been lost. But much of that wealth is on paper and will never be realized and much of it was already recently lost. I believe that in the end the sum of money made is roughly equal to the sum of money lost. This is fundamental to a basic understanding of trading (or investing, for that matter). I have even heard it stated that it is worse than a zero sum game do to the fact of commission cost and slippage (Elder I believe). A trader can be on the right side of the trade and still not cover his cost of doing business. I also believe that the greater majority of participants supply that money to the much smaller but more savvy participants. In the end, the money of the masses, finds its way to the hands of the few. Just like in all other forms of business. Why would it be any different? Everyone (or most) cannot win.

Regards,
OZ
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