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I've been reading over and over again that trading is a zero-sum game, and
we are simply taking each other's money. I don't think this is entirely
accurate or a fair statement. The point being, the markets do not consist
only of speculators. For example, in the grains, there are speculators, but
there are also producers (farmers) and consumers (e.g. Kelloggs). My
understanding is that the original function of the markets is to transfer
risk - from producers and consumers to us, the speculators. Admittedly,
both the producers and consumers sometimes change hats and act as
speculators, but they do also act as genuine hedgers. A hedger, by
definition, is trading off potential future gain to avoid potential loss.
So aren't we speculators, as a group, operating as the insurance industry
for the producers and consumers? The market pays us for taking on risk, and
if we manage the risk wisely we get to keep what we're paid. A legitimate
and honorable business function.
At any rate, I feel better if I assume the other side of my winning trade
was a commercial entity knowingly trading off risk, rather than one of my
good friends on the RealTraders forum...
Regards to all, and good night,
David
> Walt wrote:
> > SUMMATION:
> >
> > Good trading and good business can not be considered analogous
> > at all. Trading is a game of speculation between two participants who
> > understand and agree to the rules of the game. The goal of business
> > is to provide value.
> >
> Norman wrote:
> > Walt
>
> I am a big advocate of the concept of value is given for value
> recieved. However, I don't agree that those who trade are not providing
> an important service to the market. Those who trade are adding liquidity
> and helping the market to be effecient ...
>
> The "good traders" are helping in the realocation of financial
> resources from the less effecient
>
> Walt wrote:
>
> Hi Norman,
>
> That's odd. I don't read where I wrote anywhere that traders don't
> produce value. They produce value for themselves and the exchanges.
> The exchanges produce value by serving in many capacities. You're 100%
> correct. I disagree with Pete's implying that the ethical cut and thrust
> of actual trading is analogous to ethical business.
> ***
> * Zoroingly,
> *** Walt
>
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