Losing Traders

disarray said:

a "loss" can be a less significant win though in this respect. if it takes 5 years to go from 9c to 20c while in that time the market doubled that, that counts as an overall loss because the capital could have been put to better use elsewhere.

accumulating wealth at a slower rate in a constantly expanding pool can still be considered a loss for the purposes of this discussion.

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Yes a valid set of circumstances in regards to lost opp.. Question then Disaray, what is the definition of a "winning trader"? ie, what is the real criteria a "winning trader" has to meet?
Looking at it from this perspective and with a zero sum arguement in mind, your arguement is in danger of significantly widening the parameters of a "losing trader" to the point where there are too many losing traders and therefore the zero sum game fails!!
Get your head round that!

YELNATS said:

It just depends on whether the 4-fold increase in share price accurately reflects an increase in the Real Value of the business concerned or whether it only relects an increase in the Perceived Value or Expected Future Value of the business.

Any increase in Real Value will be evidenced by a commensurate objective increase in the productivity of the business, according to however productivity is measured in that particular industry.

An increase in share price solely based on an increase in Perceived Value, which is unsupported, within a timeframe recognised and accepted within that industry, by any increase in Real Value will in due course be followed by a commensuarte reduction in Perceived Value and hence, share price.

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Yellnat great point about what has "actually" been gained in terms of the intrinsic value for the second owner of the share.

the point being argued is -

"if there are no losing traders there can be no winners"

capital is finite. you are trying to accumulate more from a limited pool. if the world is worth $100 and 5 people are all trying to get a piece, then we each get $20. if i want $21, someone else has to have $19 (or everyone else have $19.75).

now the world economy (gdp) is worth about $65 trillion. the world population is 6.5 billion. so everyone in the world can have $10,000. for us to have a per capita GDP of $30,000 means 2 other equal amounts of people have nothing. or a whole bunch more have less than $10,000 spread out amongst them.

the whole point of us being traders is to profit from interactions of the global supply / demand cycle. we skirt the edges of the worlds commerce nibbling bits and pieces out of the pool of humanitys wealth. the whole reason this wealth exists (and has existed since the first people swapped a fish for some beads) is to satisfy needs and desires.

if the resources required to satisfy all these needs and desires are finite, then we must compete to access our share. this is the driving force of nature on this planet. for a species to thrive another competing species must die. to thrive we must acquire more. to acquire more of the finite pool we must deprive another of their share.

so for me to win, someone else must lose (pedantics about definitions of "win" and "lose" aside).

then we can go into evolution (growing as a trader, developing better systems etc.) and devolution (people getting caned on T2 and never entering the market again), conflict (trade wars) and the whole range of stuff that makes us people and is reflected in the market (greed, fear etc.). but thats another essay

A stock market, however, is not a zero-sum game because wealth can be created in a stock market."

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The Misconception is that if there is a winner there must be losers.

If that is the case then the ASX wouldnt look like this.(see Chart)!

Remember the majority of trading is carried out by institutions often retail buyers and sellers sell into institutional buy and sell levels.These buy and sell levels can be when stock is rising (Selling) or Falling (Buying).
Sure there will be losers,but there doesnt have to be a loser for every winner.

Mind you there are more losers than winners and I believe that those who are winners are generally very big winners.
The point being missed is there are outside scources of funds being injected all the time.
Superfunds,and Managed funds etc.

yep tech,

for every winner there is a loser would only be in a situation where you have a pool of the same traders and then only in the long run.

just like tossing a coin and counting the heads and tails coming up......in the end it will be 50/50

yonnie said:

just like tossing a coin and counting the heads and tails coming up......in the end it will be 50/50

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not quite correct, very rarely a coin will land perfectly balanced on its edge.
Also a common misconception is that if the odds of either a heads or tails on a single coin toss are 50/50 then statistically in the long run over a number of coin tosses heads and tails will come up an even amount of times. This is incorrect, try it.

did you try it a million times biff?

never mind, already get tired by the thought of it

biff said:

not quite correct, very rarely a coin will land perfectly balanced on its edge.
Also a common misconception is that if the odds of either a heads or tails on a single coin toss are 50/50 then statistically in the long run over a number of coin tosses heads and tails will come up an even amount of times. This is incorrect, try it.

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yonnie said:

did you try it a million times biff?

never mind, already get tired by the thought of it

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The law of large numbers