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Strategies & Market Trends : DAYTRADING Fundamentals -- Ignore unavailable to you. Want to Upgrade?

To: Jon Tara who wrote (7947)	4/22/2000 10:22:00 PM
From: OZ	Read Replies (1) \| Respond to 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

To: Jon Tara who wrote (7947)	4/23/2000 10:42:00 AM
From: Dan Duchardt	Read Replies (1) \| Respond to of 18137

Jon, No, this is just plain wrong. For one (equity) trader to win, it is not necessary that another trader lose. My statement does not presume that anybody has to lose money (even though many do and will), nor does it presume that trading is a zero sum game (I agree with you that it is not). It is simple and incontestable mathematics to state that in a sample of "scores" of any kind, if there is even one score above average there must be at least one below average, though not necessarily negative. Beyond that, nature has provided us with enormous evidence that in a large sample of scores the distribution about the mean is symmetric, following the classic "bell shape curve", and mathematicians have given us a measure of the width of a distribution called the standard deviation. Although I don't have the data available to see and calculate the standard deviation, symmetry is a valid assumption for investment/trading returns and it demands that about half the investors accept below average returns, while half enjoy better than average. Symmetry also demands that if there are a number of scores several standard deviations above average, there will be a similar number the same distance below. Even though the arithmetic of averaging does not require that any be negative, there always are some and there always will be. It is therefore a valid conclusion that if some can achieve returns in the 50% to 100% range, while the average is only about 10% (lets assume 3% gets eaten up by those things OZ mentioned in his reply), there must be some who achieve less than 10% and it is highly probable that the number who lose 40% to 90% approximates the number of 50% to 100% winners. Dan