To those that say trading is a 0 sum game...
- Thread starter bonds
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This is one of the many reasons why majority of people on this forum should not open a trading account without knowing some very basic details, because it creates unnecessary frustration.
Lets differentiate between the primary and secondary markets. When the stock was first issued at the $45 IPO price.. the company sold. (IE. when someone bought it at $45.. the company collected the $45 per share because the company was the seller).
This is the primary market offering.. and the basic concept of the IPO process.
The secondary market is when the public is exchanging shares. The buyers who initially bought at $45 looks for investors willing to buy above $45.. so they can sell to these buyers.. because they got in at $45.
IT is a zero-sum game. Those who have said no, make sure to not listen to anything these retards say on ANY thread.
daytrading is a zero-sum game. trading on longer timeframes, aka investing, shows the emergence of the wealth effect. The wealth effect causes distortions upwards or downwards. In 100 years, we have known only upwards wealth effect, due to technology or currency debasement. Negative wealth effects caused by depression was short-lived. So it is safe to say there is only a upwards wealth effect.
What is the wealth effect? The difference between money and wealth. Imagine 3 silver investors in a bar. One guy has $10. One guy has $20. One guy has 2 silver coins. The first guys buys a silver coin from the thrid guy for $10. The third guy like it, but wants $20 for the second coin. The second guy also wants a silver coin, and buys it for $20.
Now the first and second guy each have a silver coin, the third guy has $30, and the price of silver coins is $20. Wealth is $40 but actual money is $30. Before the second guy bought the silver coin however, wealth was $20 and actual money $30. Welath effect doubled the perception of wealth. The same thing happens in the stock market.
What is the wealth effect? The difference between money and wealth. Imagine 3 silver investors in a bar. One guy has $10. One guy has $20. One guy has 2 silver coins. The first guys buys a silver coin from the thrid guy for $10. The third guy like it, but wants $20 for the second coin. The second guy also wants a silver coin, and buys it for $20.
Now the first and second guy each have a silver coin, the third guy has $30, and the price of silver coins is $20. Wealth is $40 but actual money is $30. Before the second guy bought the silver coin however, wealth was $20 and actual money $30. Welath effect doubled the perception of wealth. The same thing happens in the stock market.
Only if you are trading with other daytraders, and nobody is bringing fresh money to the table.
Otherwise, it's another open system, and the concept doesn't apply.
Quote from Fireplace:
A 5 minute chart prints the same as a daily chart prints the same as a monthly chart....only difference is bigger ranges as frames get larger.
Daytrading isn't any different really than investing, it's just investing and taking profits (or taking losses) at a much faster pace.
daytraders don´t take advantage of the wealth effect, like longer/term traders do. longer terms are mostly long. Why? to take advantage of the wealth effect.
this is also a common misconception. there is scientific research that clearly shows that daytraders seem to not profit from longer terms, but the opposite, they profit from the losses of other daytraders. It is more closed than you think.
This is absolutely correct. I am surprised that folks like fireplace claim success in a system they clearly don't understand in the most rudimentary format.
Their claims are so off base that they are frankly bizzaro. Delusions run deep today. Particullarly in this business.
I like the guy. Just hope he quits or starts seeing the world rationally soon.
I have read that if you bought just before the crash it took you till 1954 to get even. Given that those who do the numbers are usually trying to put the best face on it, my guess is that scenario represents the Dow or some other grouping of strong companies -- not the average company.
My grandfather had a modest portfolio that he acquired between 1926 and 1929 which he held through the crash and the subsequent depression. My grandmother inherited the securities when he died in 1945. In 1961 my father liquidated the positions at her request. No stock had been bought or sold between '29 and '61 and, since every position that had been taken was in a large solid concern, not a single one of those companies went under.
Bottom line: The aggregate sale price was $300 higher than what those shares cost to acquire in the 20's -- a capital gain of approximately 1% over a 30+ year period. All of the stocks were dividend payers (although I'm sure some suspended during the 30's) but I do not have number or even a guess as to what the dividends amounted to.
I think it is important to note that every company survived. I'm sure that a randomly chosen sample of common stock of all publicly traded companies would not have come back to break even before the bull market of the late '60s. For that investor it would been a 40 year wait to break even.
Trading clearly has its share of risk. Yet I wonder if investors have an adequate appreciation of the risks involved in managing money in an investment paradigm. Certainly the propaganda machine does its best to obscure reality ... and, we must admit, they do a damn good smoke and mirror act. Wealth effect? Yes it is a reality. But, unless you know you will live 200 years it is not a reality you can count on. As a dear friend -- a truly great poker player -- once pointed out to me, the operative word in The Law of Large Numbers (commonly misnomered as the Law of Probability) is LARGE. Waiting for it to all come out in the wash does you no good if you need clean underwear and socks Tuesday.
My grandfather had a modest portfolio that he acquired between 1926 and 1929 which he held through the crash and the subsequent depression. My grandmother inherited the securities when he died in 1945. In 1961 my father liquidated the positions at her request. No stock had been bought or sold between '29 and '61 and, since every position that had been taken was in a large solid concern, not a single one of those companies went under.
Bottom line: The aggregate sale price was $300 higher than what those shares cost to acquire in the 20's -- a capital gain of approximately 1% over a 30+ year period. All of the stocks were dividend payers (although I'm sure some suspended during the 30's) but I do not have number or even a guess as to what the dividends amounted to.
I think it is important to note that every company survived. I'm sure that a randomly chosen sample of common stock of all publicly traded companies would not have come back to break even before the bull market of the late '60s. For that investor it would been a 40 year wait to break even.
Trading clearly has its share of risk. Yet I wonder if investors have an adequate appreciation of the risks involved in managing money in an investment paradigm. Certainly the propaganda machine does its best to obscure reality ... and, we must admit, they do a damn good smoke and mirror act. Wealth effect? Yes it is a reality. But, unless you know you will live 200 years it is not a reality you can count on. As a dear friend -- a truly great poker player -- once pointed out to me, the operative word in The Law of Large Numbers (commonly misnomered as the Law of Probability) is LARGE. Waiting for it to all come out in the wash does you no good if you need clean underwear and socks Tuesday.
Quote from Fireplace:
Dal, would you give up a very lucrative business just because a few anonymous people on a message board don't understand how you do it?
I didn't think so
Have a great weekend!
Of course not, FP.
Based on the generic descriptions of yours and others TA trading --it is very unlikely that you are profitable or if so, it's purely a streak o luck. There is no edge in your description as it's the same thing taught adnaseum