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How does the change in market capitalization in stocks affect whether
it is a zero-sum game? My highly unscientific theory is that taking
into account a large number of trades over time, the stock market is
not a zero-sum game because total market capitalization changes, and
traders participate in the change in capitalization. Everyone's hope
is that as prices go up, over a series of trades, both traders on
either side of a given trade can end up better off at some point in
the future.
On the other hand, when market capitalization is decreasing, prices
going down, it's more likely that one or both traders end up poorer.
On yet another hand, does decreasing market capitalization also
represent money leaving the equity market and going to another
investment, and not necessarily a loss for traders.
Futures and options, on the other hand, seem to me to be zero-sum (or
less than, taking into account transaction costs).
I should also read a book on game theory, I'm sure I'm missing
something. Shoot holes in my theory, please, I'll learn something.
Gary
--- In Metastockusers@xxxxxxxxxxxxxxx, "Lionel Issen" <lissen@xxxx>
wrote:
> No Jason. Since you have to pay commissions (an entry fee) it is
not a
> zero sum game. Just look up a book on game theory.
> Lionel
>
>
> -----Original Message-----
> From: Bob Jagow [mailto:bjagow@x...]
> Sent: Thursday, January 16, 2003 4:12 PM
> To: Metastockusers@xxxxxxxxxxxxxxx
> Subject: RE: [Metastockusers] Full time private trading... ... an
> unattainable dream?
>
>
> Jason,
> Futures are zero sum [negative after commissions]; stocks aren't
if
> you'll concede that buy-and-hold is viable over the long haul.
>
> Bob
>
> -----Original Message-----
> From: Jayson [mailto:jcasavant@x...]
> Sent: Thursday, January 16, 2003 9:25 AM
> To: Metastockusers@xxxxxxxxxxxxxxx
> Subject: RE: [Metastockusers] Full time private trading... ... an
> unattainable dream?
>
>
> Lionel,
>
> Only in the sense that you must pay commission on your trades. The
> market is in fact zero sum in that there must be a buyer for every
> seller. That is not to say that an individual can not make money,
only
> that for every $ he makes there is a corresponding loser somewhere
else.
>
>
> An individual has many advantages over the large institutions and
hedge
> fund managers. He/she can turn on a dime. Selling 1000 shares of
CSCO
> will not drive the market the way an institutional sell of 1
million or
> 10 million shares can. This is exactly where the individual can
make
> money. By learning to spot the signals that the big guys are trying
to
> load or unload large volumes of shares in a systematic way the
small guy
> can take his piece out of the middle of the move. If the small guy
is
> trying to make money picking the big turns he will likely come out
short
> in the end but by taking advantage of the overall direction the big
> money is currently steering the price he can very successfully come
out
> on top.....
>
> Jayson
> -----Original Message-----
> From: Lionel Issen [mailto:lissen@x...]
> Sent: Thursday, January 16, 2003 11:35 AM
> To: Metastockusers@xxxxxxxxxxxxxxx
> Subject: RE: [Metastockusers] Full time private trading... ... an
> unattainable dream?
>
>
> The stock market is not a zero-sum game, it is a negative sum game
just
> like the pari-mutuel race track. The money taken out is less than
the
> money put in. This doesn't mean that everyone must lose, but it
does
> mean that to win you must be alert.
>
> Lionel
>
>
>
>
>
> -----Original Message-----
> From: Dan [mailto:amarones@x...]
> Sent: Thursday, January 16, 2003 9:35 AM
> To: Metastockusers@xxxxxxxxxxxxxxx
> Subject: Re: [Metastockusers] Full time private trading... ... an
> unattainable dream?
>
>
> Nick-
>
> I have been trading off and on for about 10 years, both privately
and as
> a CTA for a time. I am definatley on the short end of the net zero
game
> as a whole, but my dream of being a full time trader has been
> revitalized and is on the way to being realized in the last year.
> Who knows, I may blow up the account and have to start over again at
> some point, but my experience in trading tells me I've finally
found
> what works for me. I think that is the key - what works for each
trader.
> I spent what feels like a lifetime with everything in the trading
world
> that didn't work for me.
> I disagree that one must switch markets to be consistently
successful.
> If any market has the characteristics of orderly accumulation and
> distribution and sufficient liquidity, then it can be consistently
> traded.The markets on the U.S. futures and equity exchanges offer
too
> many issues and markets that exhibit these characteristics for me to
> consider trading more than just the cream of the crop. I don't
think it
> is necessary to switch from domestic to foreign markets and from
> equities to futures to be successful - there are so many market
> personalities within each of those sectors, that the opportunities
are
> far more than I have the capacity to consider.
> For me it would be ludicrous to ignore either the long or short
side of
> the market because it would mean giving up half the potential
profits. I
> use a 100% mechanical system developed with Metastock that averages
76%
> winners. It's not perfect, but it backtested an average gain of 240%
> annually over the last 2 years and is perfoming as advertised in
real
> trading.
> For me the clouds have lifted and I can finally see the dream of
being a
> full time successful trader on the way to being realized.
>
> Dan Edens
>
>
>
>
> From: Nick Leong <mailto:zaiguy@x...>
>
> To: Metastockusers@xxxxxxxxxxxxxxx
> Sent: Wednesday, January 15, 2003 4:29 PM
> Subject: [Metastockusers] Full time private trading... ... an
> unattainable dream?
>
>
> Hi group,
>
> I've been reading some articles about the hedge fund management
industry
> and how most funds sustained losses over the past 2 years especially
> since Sept 11 and the US corporate scandal. This is coupled with a
> statistic I read that most novice traders leave the trading arena
after
> about 3 months. These events really got me thinking. . is it really
> possible for one to be a full time private trader?
>
> I've been trading privately for about 4 years not and like most of
you
> I've had my ups and downs. I am a firm believer that trading the
market
> is a zero sum game. Someone MUST lose in order for me to make a
gain.
> However, the law of averages dictates that it is just not possible
for
> anyone to be winning all the time. That being the case, is it
actually
> possible for anyone to be a full time private trader (i.e. trade
using
> only his own money and make a living out of it)?
>
> The only possible way for one to make money is possibly to be
engaged in
> the right market at the right time, e.g. to switch between the
> equities/futures/derivatives markets or switch between the
> US/Europe/Asian markets. But we must also remember that a private
trader
> does not have the resources or the mental capacity to handle so much
> information or research at a single time. What option would be left
> then? To specialise and trade only in specific markets and sit
things
> out when everything is not going well? Do not forget that a
downturn in
> the market can last for years.
>
> We can go into the nitty gritty and say that we must set up stops to
> prevent losses, but I'm sure most of you have been in the situation
> where you were stopped out too early or you had given so much room
> before being stopped out that you suffered a painful loss. Don't
get me
> wrong, I believe that trading and investing is an art and there is
no
> one mechanical way of getting the right results. Ultimately, we are
all
> looking for one thing. .PROFITS. However, I have come under the
> increasing impression that the odds are severely stacked against the
> private trader.
>
> I look forward to hearing from you guys on this matter.
>
> Thanks.
>
> Nick Leong
>
>
>
>
> _____
>
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