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Who is losing money on the street ?
- Thread starter uniafly
- Start date
The markets aren't a zero sum game because neither stock markets nor the futures markets nor any others are a closed system.
There is almost always a net inflow or outflow of cash to the "real" economy - everything from people with 401ks auto-allocating money to their retirement account every month out of their paycheck to some trader taking profits intraday and then cashing out so he can spend the profits (or depositing external funds to meet a margin call!)
There is almost always a net inflow or outflow of cash to the "real" economy - everything from people with 401ks auto-allocating money to their retirement account every month out of their paycheck to some trader taking profits intraday and then cashing out so he can spend the profits (or depositing external funds to meet a margin call!)
From the thread: http://www.elitetrader.com/vb/newreply.php?s=&action=newreply&postid=1776388
Related answer (the question is at the bottom) is:
Related answer (the question is at the bottom) is:
Quote from riskfreetrading:
Let me say the following (with some questions):
1. Who pays the analysts, the brokers, the market makers, the stock exchange fees, the investment bankers who underwrote the IPO? These people have to be paid somehow. Tell us who pays them,and they make no risk. We know that they make a lot of money!
2. Your explanation of the facts in not complete. But let us accept it as it is. Could I ask this: is not your explanation also valid in a Ponzi scheme? And we know that the Ponzi scheme aas viewed through your prism looks good.
3. I hope that in answering point 2, you may know realize that what you looked at is the left side of the price vs. time mountain. How about the right side when the price heads back to zero (lower than where it started at IPO time)?
4. You should know that at IPO, the initial investors get their cut.
Those have really sold a real business, and obtained safe money.
5. In case you question the right side of point 3, what is the number of stocks that ended up at zero. Have you ever visited the graveyard of stocks that started above zero (IPO) and ended at zero at one point in time. If the company is a growth company, this means that dividend was not paid and nothing was paid back.
Such stocks are the largest graveyard of NEGATIVE sum games if you count only the traders who got involved after the IPO. And that include you Mr. Knowledgeable! If you doubt my assumption how many .com 's fit my description. And we did not go back in time!
Do not be fooled by indices. They forget their dead, and include just the best of the crop. The graveyard and junk yards are full (and some of your money is likely there) of negative sum stocks.
You seem to have looked at things from your views! Change your seat,and may be you will see other things!
Quote from NY0BScalper:
You just presented proof that have absolutely no concept of what's going on in the markets,
You just said all money is transferred to market participants except for the money from commissions (fine) and SPREADS.
A stock has a bid in at 129.90 for 2000 shares and an offer at 130.00 for 1000 shares. Behind that 1000 shares at 130.00 there are no offers until 130.35.
I buy the 1000 shares at 130.00 and then place an offer at 130.35. If someone else wanted that stock at that price, it's too bad because he missed it and will have to pay up. He will buy 130.35, and even though there may be no bid until 130.90, thus creating a 45 cent spread, the "spread" is going from his hands to mine. Think of that transaction in a vacuum - imagine a market with no bids at all, and only one offer at 130.00 for 1000 shares. The market has never traded before and there only exist 1000 shares of this company in the float. I buy that 1000 shares at 130.00, and then put an offer up at 130.35. Someone then buys me at 130.35. He then decides he doesn't want the stock and puts it back on the offer at 100. Nothing has changed in the market from the beginning to the end, except that 350 has gone out of one trader's pocket and into mine and a different entity has ownership of the company and is trying to sell it. A spread isn't an actual cost. Is the cost of a spread negative if immediately after "paying" it an algorithm jumps in and bids 30 cents higher?
When money goes out of one trader's account because he paid the spread, it goes into the account of a market maker or scalper or some other market participant.
.
Quote from DeeDeeTwo:
Ignoring transaction costs which are now very low...
Short term trading in stock is a Zero Sum Game...
Long term investing in stocks is not.
Pros practicing some form of arbitrage, market makers, and scalpers...
Are usually hedged close to 50/50 long/short...
And do not benefit from long term stock appreciation in any way.
This forum is about trading... not investing.
Let these facts sink in... before you post any more nonsense.
I am sorry but I find this thread excellent!
"Long term investing in stocks is not." is valid only for major indices (which drop stocks and include new ones). If you include all stocks past and present, I am convinced that stocks are a NEGATIVE sum game if we restrict things to the general investor (meaning do not include investment bankers, pre-IPO investors, exchanges, brokers, and all those with zero risk positions).
Quote from intradaybill:
Hedging involves two different games. Hedger is no trader yo.
Bill
So, for example, any trader who uses covered calls as part of his strategy to hedge is NOT a trader (as one example)....hmm. I think many would beg to differ.
Many hedgers are traders. Every energy company that has hedgers who are traders who have a material affect on their P&L.