Successful traders keep silent because trading is so simple...

[Chood]

I disagree with the below portion of your proposition:

Quote from ion:


. . .
The reason they don't talk... is simply because successful trading is so simple... or I should say, successful trading method is very simple. . .

The methods are so simple that you only need 30 seconds to tell someone the essence... what is difficult is the path that one had to go thru before he reaches these simple methods (enlightened stage?) . . .

I'd say that for the retail investor, the only simple element of trading is the recognition of that part of the relevant information which is beyond the investor's reach, which (usually) is the majority of the relevant information. The rest -- i.e., the limited information available to the investor -- thus must carry an outsize burden if the investor hopes to succeed. Extrapolation and other analytical tools that make that feasible are not simple. Indeed, simplicity fairly may be said to be the antithesis of a retail trader's success prospects.

 

[BSAM]

Quote from Chood:

I disagree with the below portion of your proposition:



I'd say that for the retail investor, the only simple element of trading is the recognition of that part of the relevant information which is beyond the investor's reach, which (usually) is the majority of the relevant information. The rest -- i.e., the limited information available to the investor -- thus must carry an outsize burden if the investor hopes to succeed. Extrapolation and other analytical tools that make that feasible are not simple. Indeed, simplicity fairly may be said to be the antithesis of a retail trader's success prospects.

Are you just extremely intelligent, or are you trying to say that good trading is not simple? I'll be clear: Good trading is simple.

Now, if you know how to make trading complex and you are able to extract some money, then good for you!! (But, you don't have to make it difficult.)

 

[jj90]

Quote from ion:
When you are buying 1 Euro FX contract from CME, you're buying 125000 Euro... arbitrageurs make sure that after interest rate difference, expiration time and all that, it is equivalent to buying 125000 Euro at spot rate... or else you have a sure arbitrage profit on hand, which doesn't normally exist...

When you make $1 from going long Euro FX contract, you make it from the seller who sell the contract to you, which eventually is an arbitrageur who transfers the losses to the spot FX market, and the losses reflect on the exchange rate, and everyone owning Euro dollar shares the losses of the $1 profit that you've just made...

So when you make $1 from Euro dollar speculation, no matter which instrument you use, you take that $1 profit from the pockets of ALL the people who own Euro dollars... This is the same for anything with real underlyings... equity futures included...

What you describe here IS the definition of 0 sum. If I made $1, someone lost a $1. An arbitrageur doesn't impact the spot market unless something is mispriced. If it is, it will be arbed until it returns to normal, and everyone who took the other side WILL have a locked in loss, hedge or no hedge when interest rate differential returns to normal.

Quote from ion:
and everyone owning Euro dollar shares the losses of the $1 profit that you've just made...

If I make it from the seller, and I'm long, everyone else who is long has a counterparty and made that same $1 from their counterparty. Again, another flaw in your argument. This one is blatantly obvious.

Quote from ion:
no matter which instrument you use, you take that $1 profit from the pockets of ALL the people who own Euro dollars...

I traded with someone else and that person is the ONLY counterparty to my trade, so I took that person's money. How can I take the money of others I didn't trade with? All those short Euro loses money to those who are long Euro. Once again, 0 sum. Your assumption here is based that arber's can impact the exchange rate, which they can but doesn't matter when the arb is realized.

Quote from petrotrader:
It's pretty simple: hedging, arbitrage, spreading, etc.

Once again, not true. If I buy 1 mispriced (to my favor) futures contract, the person who sold it to me loses instantly it becomes realized no matter what that person hedges with. And if there is no arb, and my counterparty just hedges off their risk to another counterparty and so on, someone out there is eventually short the future I bought and that person is the one whose money I take. Come up with an example if you can prove otherwise.

Quote from lar:
I agree that trading is not a zero sum game. Trading is a minus sum game.

You aren't the 1st one who is confusing 0 sum with negative expectancy. What you describe is negative expectancy where if winning is 50/50 in the long run you still lose, not breakeven. whitster describes this perfectly. If you make money on a futures contract, someone else lost the exact same amount to you. You can have a 50/50 win rate and still not BE after comms in the long run. THAT is negative expectancy, but it doesn't change the fact that the EXACT amount changed hands.

 

[insert]

I admit when I am way in over my head

Zero sum or not, well look at it this way

its not zero sum, because we the people keep taking resources from planet earth and pumping it into the market

am I on to something here,

Or did I just lose it

 

[kiwi_trader]

Trading futures is not a zero sum game for the players (traders). Its negative sum because of the fees and commissions removed by game parasites (only 90% say is left for players).

In the same way, roulette with double zeros etc for the house is negative sum.

Long only positions in stocks will be positive sum iff the injected growth exceeds the amounts removed by the system parasites.

 

[u21c3f6]

I think it is more important to understand the concept than to argue the semantics of zero-sum vs negative expectation.

By the zero-sum definition given, horse race wagering is also a zero-sum game but anyone that knows anything about how a parimutuel works realizes that the house takes anywhere from 15 to 30% of the pool. Most would say and understand that horse race wagering is not a "zero-sum" game.

Let's not quibble about definitions.

Joe.

PS. Trading IS very simple but mastering it can be very difficult.

 

[whitster]

let's also not MAKE UP TERMS

zero sum means something because it has been invented and defined as a part of game theory (try actually studying game theory).

"negative sum" is meaningless. what you mean is commonly referred to as (as the previous poster mentioned) negative EXPECTANCY.

the futures markets are negative expectancy because they are zero sum and when u ADD commissions, they become negative expectancy because more money will necessarily be lost INCLUDING commissions (which will of course be a gain to the exchanges themselves, but they are not included in the calculation for zero sum which only includes the participants).

i have referenced the COT reports. please research them. at ANY given time, any futures contract has an "open interest". what MUST be true is that the EXACT same # of contracts are open long as are opened short. so, every tick in either direction necessarily creates the same amount gained as lost among all market participants. when a transaction is made, the # again is the SAME. the exact same # of long vs. short contracts.

futures contracts are merely AGREEMENTS, they are not "STUFF". stocks are stuff.

see also options. every call you buy necessarily has a call writer who is SHORT that call. calls, like futures contracts can be created out of thin air and one is not created until a counteracting position is held - one writer, one owner

true... period.

the stock market does NOT work that way. it is NOT negative expectancy. it is not zero sum. it is possible (although unlikely) that 95% of market participants could make $$$ in any given time period. and that the money won = 5 times the money lost. it is also possible for 90% of market participants to lose money in any given time period. again, NOT true of futures or options

i detest the way the term "zero sum" is used by so many who have appropriated without understanding it. you can misuse it all you want, but it doesn't change the reality.

the structure of stock markets vs. derivatives markets is necessarily different.

it is 100% IRRELEVANT as to the concept of zero sum that arbitraging occurs BETWEEN markets. it is still necessarily true that WITHIN the derivatives market, it remains zero sum. obviously, an aggregation of a zero sum and a non-zero sum market as a totality will not be zero sum

but arb's cannot change the fact of the structure of the futures market. which is zero sum

 

[stock777]

Quote from fearless9:

Hi Damian

you mean that trading is the hardest way of making an easy living that you know... I read that somewhere and it always stuck.
regards
f9

Don't flatter yourself, try playing the horses for a living. Lot's harder than the markets, but more fun, and you get to smell horse droppings as a free bonus.

Actually, many now play from home, so they lose that perk.

 

[whitster]

correction on my last post. in a zero sum game, any # of participants can win money (95% for example), but the AMOUNT of money won by the winners NECESSARILY equals the amount lost.

to clarify

 

[trader225]

Another thing, regarding futures (zero-sum, excluding commissions): Someone here seems to think that if you make money it comes out of the pocket of the person taking the other side of your trade. Not necessarily so. Buyers and sellers are matched anonymously, CME anyway. And consider that if you went long and made money, you may have bought from a long who also made money -- every contract that is sold isn't a new contract, freshly sold by a short.