It's pretty simple: hedging, arbitrage, spreading, etc.
Successful traders keep silent because trading is so simple...
- Thread starter ion
- Start date
It's pretty simple: hedging, arbitrage, spreading, etc.
derivatives are zero sum
a greater system (a derivatives market aggregated with an equities market) is not
here is how it works
derivatives = zero sum market
aggregated market (derivative market + equites market) =/= zero sum
again, it is a structure of market issue
the fact that an instrument traded in a derivatives market can be (and is) arbed by an instrument in a non zero sum market is 100% irrelevant to the individual market as to whether or not it is zero sum. again, it's a structural issue
and again, explaining this to people who don't understand math, logic, or game theory gets old
sigh...
a greater system (a derivatives market aggregated with an equities market) is not
here is how it works
derivatives = zero sum market
aggregated market (derivative market + equites market) =/= zero sum
again, it is a structure of market issue
the fact that an instrument traded in a derivatives market can be (and is) arbed by an instrument in a non zero sum market is 100% irrelevant to the individual market as to whether or not it is zero sum. again, it's a structural issue
and again, explaining this to people who don't understand math, logic, or game theory gets old
sigh...
iow, when u look at all markets that trade in the dow complex
the DIA etf
the underlying dow stocks (NYSE)
DIA single stock futures
YM futures
big dow futures
dow pit contract
options on dow futures
options on DIA
etc.
etc. as an aggregate market, that is clearly NOT zero sum
but any of the individual derivatives markets are *(and have to be) zero sum. any of the equities markets are not. an aggregate that includes any non-zero sum market will necesasrily not be zero sum even if 4/5 of the markets in your "metamarket{" are zero sum
it's not complicated. structure, structure, structure.
the DIA etf
the underlying dow stocks (NYSE)
DIA single stock futures
YM futures
big dow futures
dow pit contract
options on dow futures
options on DIA
etc.
etc. as an aggregate market, that is clearly NOT zero sum
but any of the individual derivatives markets are *(and have to be) zero sum. any of the equities markets are not. an aggregate that includes any non-zero sum market will necesasrily not be zero sum even if 4/5 of the markets in your "metamarket{" are zero sum
it's not complicated. structure, structure, structure.
Hello ion, 
This is about FX, isn't it?
Well FX trading suite traders who go for:
1) Calculated risks
2) High yielding profits
3) Sound principles
4) Strategies to rely
5) Clear entry and exit points,
How does it sound? Are you into these, and then you should be making a hell lot of money from Forex...
This is about FX, isn't it?
Well FX trading suite traders who go for:
1) Calculated risks
2) High yielding profits
3) Sound principles
4) Strategies to rely
5) Clear entry and exit points,
How does it sound? Are you into these, and then you should be making a hell lot of money from Forex...
I agree that trading is not a zero sum game. Trading is a minus sum game. Here is the basic math: The short and the long side both pay contest costs (vig aka B/A spreads, commissions and other fees/costs). Let's say one trader went short at 50 and another went long at 50 (same underlying at the same time) then the market moves to 60. The long winner wins 10 minus the contest costs - let's call that a total net credit of 8. The short loser loses the 10 PLUS the contest costs - let's call that a net debit of 12. Winner wins 8 and the loser loses 12 because the infrastructure costs must be paid.
fwiw.
Quote from NihabaAshi:
Hi ion,
It's more like if too many people know about it, their improved performance will make my performance not seem so unique.
This applies to liquid markets only.
Therefore, if I had some edge in trading something illiquid...probably not a smart thing to share how your exploiting that illiquid market.
Regardless, it always comes down to what the actual edge is that's being shared.
Simply, there are some edges when shared...their performance level will not be affected no matter how many people are aware of its specific details.
Yet, there are other edges when shared...there will be a negative impact on their performance.
Also, not discussed a lot, although many threads at ET are proof that when a method is shared...
It's applied differently, parameters changed (altered), applied on different trading instruments by those with a strong interest in it after receiving the details of the method.
These threads displays the repetitive aspect of the human psychology in the markets where we need to change something to make it feel like our own.
Thus, when I meet someone that saids they have a profitable method but don't want to share it...
I believe this is a trader that knows his/her methodology well enough to know that sharing it will have a negative impact on his/her own performance level.
Just the same, when I meet someone that saids they have a profitable method and wants to share it...
I believe this is a trader that knows his/her methodology well enough to know that sharing it will not affect his/her performance level.
Some traders fear the competition while other traders do not fear the competition.
Last of all, I want to put a lot of emphasis on something I mention before by mentioning it again.
More often than not those that you see that are not sharing are actually sharing...
They just aren't sharing with you.
Mark
Hi Mark,
Thanks for pointing it out... I guess I need to take responsibility - why my friends are not sharing their trading secrets with me...
I guess it's not them, it's me...
I've probably slowly turned into an ass along the journey...
Time for some soul searching...
I have just caught up with this thread as it meanders it's way through zero sum games ..... quite fascinating really.
To be honest I have never given the thing much thought other than to be aware that the cme matches a buyer to a seller per contract and therefore exits can be more dodgy than entries.
One thing to be aware of is that a small number of traders account for the bulk of the trading each session.
Someone, Brett I think, ran some figures on this, which I read, took note of, and promptly forgot, because I am constantly reminded of this in the T&S.
Here is a question for you all regarding size (successful) traders.
I equate size with success only on the assumption that no one would continue to trade size unprofitably.
"Why is it that large orders can consistently fill to the long and short side within a couple of tics of each other?"
Does this mean one is right and one is wrong in each individual case.
Is every size order a hedge against cash.
Are the traders looking at different
frames. ie scalpers versus moc for example.
Do they not care about trading as close as possible to the extreme tic.
It always fascinates me to watch the T&S and see orders >100 flow in on both sides and then watch some one thump down 1000 long or 1500 short and still not turn the market.
Now, I am more inclined to assume that anything over say 500 is a hedge marching to the beat of a different drum.
Has anybody here compared >100 lot traders to sub 100 or say sub10 where it is fair to assume that the newbies live.
What as any of this got to do with success.
Well, quite a bit actually, because as people have mentioned here before; it is not the quantity of knowledge that makes you successful.
No, it is not that at all.
It is the small bit of knowledge that you retain and use over and over after you have discarded all the superfluous rest.
However in order to gain this gem we go through the same painful process.
To be honest I have never given the thing much thought other than to be aware that the cme matches a buyer to a seller per contract and therefore exits can be more dodgy than entries.
One thing to be aware of is that a small number of traders account for the bulk of the trading each session.
Someone, Brett I think, ran some figures on this, which I read, took note of, and promptly forgot, because I am constantly reminded of this in the T&S.
Here is a question for you all regarding size (successful) traders.
I equate size with success only on the assumption that no one would continue to trade size unprofitably.
"Why is it that large orders can consistently fill to the long and short side within a couple of tics of each other?"
Does this mean one is right and one is wrong in each individual case.
Is every size order a hedge against cash.
Are the traders looking at different
frames. ie scalpers versus moc for example.
Do they not care about trading as close as possible to the extreme tic.
It always fascinates me to watch the T&S and see orders >100 flow in on both sides and then watch some one thump down 1000 long or 1500 short and still not turn the market.
Now, I am more inclined to assume that anything over say 500 is a hedge marching to the beat of a different drum.
Has anybody here compared >100 lot traders to sub 100 or say sub10 where it is fair to assume that the newbies live.
What as any of this got to do with success.
Well, quite a bit actually, because as people have mentioned here before; it is not the quantity of knowledge that makes you successful.
No, it is not that at all.
It is the small bit of knowledge that you retain and use over and over after you have discarded all the superfluous rest.
However in order to gain this gem we go through the same painful process.
"Trading is a minus sum game"
again, false.
first of all, there is no such thing as a "minus sum game" according to game theory, but what you mean is that in futures - which is a zero sum game - if you INCLUDE commissions, more money is lost than won, since the exact amount of money won and lost on trade positions is (and has to be ) ZERO but when you add commissions, there is actually more money lost, since that is paid by both sides.
the stock market is not a "minus sum game" or a zero sum game.
again, if you don't understand this, then understand structure and read about game theory.
absent commissions, more money can be won than lost in the stock market and less money can be won than lost in the stock market.
thus it is not a zero sum game
the definition of a zero sum game is that the EXACT (note: exact) same amount of money is won and lost. your gains come from somebody else's LOSSES. that is NOT true in the stock market.
it is true of a poker game .
derivatives markets are like a poker game. a poker game without a rake (home game) is a pure zero sum game.
with the rake, it is what you refer to as a "minus sum game". iow, if you don't include the rake, it's zero sum.
home games don't (usually) have a rake. pure zero sum game.
again, false.
first of all, there is no such thing as a "minus sum game" according to game theory, but what you mean is that in futures - which is a zero sum game - if you INCLUDE commissions, more money is lost than won, since the exact amount of money won and lost on trade positions is (and has to be ) ZERO but when you add commissions, there is actually more money lost, since that is paid by both sides.
the stock market is not a "minus sum game" or a zero sum game.
again, if you don't understand this, then understand structure and read about game theory.
absent commissions, more money can be won than lost in the stock market and less money can be won than lost in the stock market.
thus it is not a zero sum game
the definition of a zero sum game is that the EXACT (note: exact) same amount of money is won and lost. your gains come from somebody else's LOSSES. that is NOT true in the stock market.
it is true of a poker game .
derivatives markets are like a poker game. a poker game without a rake (home game) is a pure zero sum game.
with the rake, it is what you refer to as a "minus sum game". iow, if you don't include the rake, it's zero sum.
home games don't (usually) have a rake. pure zero sum game.