Trading is a zero sum game

Originally posted by vhehn

another example:a farmer puts a seed in the ground.it grows into a valuable asset from nothing.same principle.
More...


Well actually, the seed draws on resources from the soil and the sun and the rain and uses them in a productive way to sustain its growth.

Look at it this way: is energy a zero sum game? Science says yes- energy can neither be created nor destroyed.

Yet we are stumbling across latent energy sources all the time. When we figure out how to split an atom and get the juice out of it, we suddenly have a new power source that wasn't available to us before. If we can make wind turbines work, hey presto, a new source for electricity.

Is this violating thermodynamics? Are we "creating" energy? Or are we just "unlocking" it by making better use of what is available? The same question could be asked in regards to rising inputs that create sustained value where none existed before.

If you can understand how energy is still technically a zero sum game even as new and better energy sources (and uses) are "unlocked" over time, you can see how the stock market is zero sum (or negative sum for both actually; heat transfer loss is like the commish vig) in the same sense. It ain't a perpetual motion machine.
 
"Well actually, the seed draws on resources from the soil and the sun and the rain and uses them in a productive way to sustain its growth."

ok so the soil lost money then.lol
 
Originally posted by vhehn

ok so the soil lost money then.lol
More...


exactly, thats why farmers rotate their crops and leave fields fallow from time to time- so all the nutrients don't get sucked out

it's all connected my man, all connected
 
darkhorse this may be the first time I question your thoughts. (Perhaps you need to write more frequently as you do not seem as sharp as normal)

In theory the stockmarket is not zero sum is because there are not equal shorts to longs. This allows for the possibility of outside work causing the market to go up. I am sure if you owned gm from the ipo- the dividends gave your more than the ipo price. so you could sell the stock to the next guy for whatever and still be a winner. Then he could sell it later and also be a winner and you know what there would be no loser. It is by my understanding that is by definition why in theory the stock market is zero sum.

Now it seems to me the stuff you were talking about was true but not really dispositive. It seems the question here is a technical one. What does zero sum mean and is the stock market zero sum (apart from commissions). Your answer really seemed to address the question of what is value.
 
Life is a zero sum game. For me to acquire money it has to come from someone else.
More...

This sums it up. Everything is zero-sum. Dating is Zero-sum. Job hunting is Zero-sum. There is no machine or mechanism that spits out more "stuff" than it was fed to begin with -- this universe doesn't operate like that.

Zero-sum does NOT mean you can't make money.
 
darkhorse, in typical fashion, is unnecessarily complicating matters. sure everything, at some level, is connected, but in order to be able to succinctly and coherently discuss a certain subject we need to arbritrarily draw the line at some point as to what is relevant. otherwise we'd have to drag ourselves through a quagmire of epistemology every time we wanted do discuss some topic. in the case of ZSG and the stockmarket, that line is drawn at the dollar value positions (long and short) of the market participants. as the stockmarket is a perpetual entity and there are unequal amounts of longs and shorts, for the purposes of this discussion (not to mention for the purposes of making money) the stock market is not a zero sum game.

PS- welcome back cuz' (the moons a waxin' again is it?:))

 
Originally posted by Runningbear
Life is a zero sum game. For me to acquire money it has to come from someone else.
More...

now that is just not true at all. value is created by mankind, therefore your gain is not necessarily someone else's loss. ( i trust you don't feel that you've "lost" money when you buy a loaf of bread do you?)
 
Originally posted by daniel_m


now that is just not true at all. value is created by mankind, therefore your gain is not necessarily someone else's loss. ( i trust you don't feel that you've "lost" money when you buy a loaf of bread do you?)
More...

Maybe there are two definitions of zero sum game

Lets say, due to supply and demand, the "perceived value" of the loaf of bread rises to $100. That is magically producing wealth out of thin air. Up until someone purchases the loaf from me..

when someone buys it from me, the $100 loss comes from THEIR pocket.

If they turn around and sell it to their neighbor for $101, that $1loss comes from their neighbor's pocket (as well as assuming the entire 7-grained asset)

So, i'm thinking that the stock market is not technically a zero sum game, in the sense of a perfect equation UP=DOWN at the SAME TIME ala futures contract.

But maybe it IS in a TIME OFFSET sense of
some "sucker" buying the loaf at $50 and selling it to some other sucker at $60 and so on, until your neighbor gets it at $101 and that proves to be the exact top and they are left holding the bag...

(where did the money come from?..the neighbor):D
 
Futures are a zero sum game. This means that for every winner, there is a loser - quite unlike the equities market where every investor can potentially be a "winner", as on average, prices rise over time due to inflation.

When trading costs are taken into account (brokerage fees and the spread between bid and ask prices), trading futures without an edge is akin to playing roulette. A buy or sell is equivalent to betting on red or black, and trading costs are the '00' on the roulette wheel. Over time it is a certainty that playing roulette will lose money, as will trading futures without an edge.
 
You must log in or register to reply here.
Back
Top