JS999

The difference between zero sum and negative sum is essentially negligible in the context of what we are talking about. Technically poker is a negative sum game too, when you take into account the fact that the house takes a certain amount out of each pot, known as the "rake". This is EXACTLY the same thing as commissions, and is irrelevant in the context of how much money is flowing between the players in both poker and in trading. So for the purpose of this discussion, you can call it zero sum or slightly negative sum, and it's the same thing. So what? It doesn't change anything that I said. Commissions are a negligible effect, and this proven when you look at how fast people are losing money, and how much of that is going to commissions. Most of it is not, and the brokerage houses themselves are not getting all that rich. For all intents and purposes the difference between zero sum and "slightly negative sum" is ZERO in the context of this discussion because the vast majority of the money flow between accounts has nothing to do with commissions. It is fast, consistent, and obvious, and proves the non-randomness of the market. I could prove this to you in 100 different ways, all expanding on what I said, but I don't have the time or inclination. Your comment here is wrong, although I am not surprised that you made it. Most people on this planet think like you do, because they don't really understand what is going on in the equities market, and why it is zero sum. I will spend a bit of time explaining this to you, since it's not something that almost anyone is going to figure out on their own and I don't mind giving away a bit of information here. First of all, equities are also zero sum exactly like every other trading market. The reason that most people don't really understand this, is that they haven't spent enough time thinking about it. You are clearly referring to the "buy and hold" theory of the equity markets, where everyone can make money by holding long positions over a period of decades, and seemingly everyone can money. Since most people are long all of the time, it looks to you as though it is not a zero sum game since almost everyone is winning and losing at the same time. The problem here is that there is really no such thing as "buy and hold". If you buy a stock, hold it for your entire life, and NEVER sell it, then you might as well burn that money in the fireplace. If that stock certificate passes down to your children and they also never sell it, then the value to them is zero as well. You can't walk into a car dealership with a stock certificate of Berkshire Hathaway and purchase a Mercedes, as it is not legal tender. They will tell you that you need to SELL it to get it back to cash first. In other words, you must COMPLETE YOUR TRADE before you can use the money. "Buy and hold" is essentially only half of the equation. There are only "buy, hold for a very very very long time, and then eventually, SELL" investors. SOMEONE has to be on the long side of that trade when you eventually get out at the end of your life, which means that SOMEONE has to be willing to buy that stock from you at a higher price than you paid for it. In the case of long-term investors, that "someone" is the next generation of people. In essence, absolutely everyone in the markets is a trader, and whether you are trading for a holding period of 5 seconds or 50 years makes no difference as you must both open AND close a trade to turn that stock value into legal tender at the end of the line. The reason that it appears that everyone of a given generation can make money by buying and holding for their whole lives, and the reason that the markets go up in the very long run despite the zero sum nature of trading, has to do with global population growth, and money flow. You see, every succeeding generation is taught to keep shoving money into the markets day after day, week after week, month after month, year after year, all on the long side. We do have periods of time where there are outflows, but they are brief and always reverse themselves. The amount of money flowing into mutual funds over time is MASSIVE, and MUST be put to work on the buy side of the market only according to the rules of the game. Because of this, and because the population of the planet keeps increasing and more people keep showing up and shoving money from other places in the economy into the market, it will continue to go up as long as this is the case. As each older generation eventually sells their stocks at the end of their lives to turn their winnings into cash, it works only because there is a new, larger generation putting money in at exactly the same time. This is the ONLY reason that it works, and this mechanism is so large and so prevalent that it dwarfs the fact that people like me are draining money from the markets with profitable trading. Ever notice how commodities markets are harder to trade than equities? You actually have to time your trades properly in those markets, getting in and out at the right times, because there is no long-term upward bias and they are truly zero-sum. They just go up and down all the time, which means that you won't get bailed out in the commodities market by simply buying and holding. Only equities have this long-term money flow, and this is what allows people with essentially no skill to still make money in the long run, if they are willing to hold a diversified position for many decades. Think of the equities market it like a bucket of water. More and more money is constantly flowing into the top of the bucket, and despite the fact that there are some small holes in the bottom of the bucket that drain cash from the container (i.e. profitable traders), there is so much more flowing in at the top all the time that the overall level is still rising. This is how everyone of a given generation can win... until of course, the music stops and that long-term money flow ceases to exist. This can and will happen when the population of the planet becomes stable and ceases to grow. If we do not cease growing naturally, then we will end up in WWIII sooner of later due to resource constraints, which will of course leave us all with much bigger problems than a market which has ceased to go up. This long-term money flow is the reason why (very intelligently) most people are told to buy and hold and to NOT try to trade. When you trade short-term, you lose the advantage of the easy "edge" of knowing that there will be more people on the planet over the next 40 years who will drive the market higher with the long-term movement of new money into the long side. It means that as a short-term trader, you are now competing against people in your own time frame instead of passing the buck on to the next generation, which is why it is harder, because it is truly zero sum in that environment and you must pit your skill directly against that of other traders. Everyone can make money investing as long as population growth continues, but very few can make money trading, because that is where the zero sum nature of trading is exposed. So essentially, this whole buy and hold thing is just an illusion in the end that is disguising the zero sum nature of trading in the equities markets. If and when there is no new, larger generation that comes along and continually shoves successively larger amounts of money into the long side of the market, that is the point that it will all hit the fan for stocks. If you are still alive at that point, you will all of a sudden see the TRUE zero sum nature of the equities market exposed, and the last generation that buys into the buy and hold mentality will not see the overall market rise in their lifetimes as they expect, as they will become the ultimate "losers" and final "bag holders" in this game. That moment is not now (thankfully for most people), but it is coming... we cannot continue to expand indefinitely inside a finite environment like planet earth, so sooner or later this has to stop. To finalize, the truth is that equities are also zero sum like every other market, but the long-term money flow coming into them over decades and centuries is (for now) disguising this fact to almost everybody, because the ultimate losers in the game haven't shown up yet. (Like I said, you can be picky and call the market slightly negative sum if you want, but it's essentially the same thing in this context. I use the term zero sum because it's easier to say, although it is not _technically_ 100% true... but the effects and observations of everything I said are identical for all intents and purposes since most of the money is not being transferred in commissions and fees). This statement is somewhat ironic, given the fact that I am right and you are wrong. In any case, I will probably not be responding too much more to this or any other threads, since I haven't learned a single thing about the markets from anybody else in a very long time, and 99.9% of the discussions on this and all other trading message boards are completely useless for me. When I waste time like this, it really ends up with me lecturing people that 2+2 is really 4, and it gets boring pretty fast. It's also against my own interests to educate any of you about anything, since we are in fact all trading against one another. So It's been fun, and if you want to keep thinking that you know what you're talking about and that you are right and I am wrong, then be my guest. This may very well be my last post. Good luck in the markets... that's the place where we argue for REAL.

Trading is a zero-sum game. This is obvious, and proven. It stems from the fact that a trade is a financial bet that you place against another human being, where only one of you can win. We cannot all trade against one another and make money, just like we can't all play poker against one another and win. In a zero-sum game that is truly random, it is statistically impossible for anybody to make money over any reasonably long period of time. It is also impossible for anybody to LOSE money over any period of time. A zero-sum game that had a random outcome would mean that every trade (or bet) that you placed had a 50% chance of making money, or a 50% chance of losing money, no matter what you did. An example of this would be a betting game where you and I rolled a 6-sided die, and if the numbers came up 1,2, or 3 I would pay you $100 and if it came up 4, 5, or 6 you would pay me $100. If we each started with $1 million and played this game for 100 million years in a row, do you know how much money we would have at the end of this time? Correct, approximately $1 million each. There would be periods of time where I won 30 bets in a row and periods of time where you won 30 bets in a row. There would be NO period of time where that die was rolled and I won 33,678 times in a row. That is, for all intents and purposes, statistically impossible. The universe would come to an end before that occurred. It is statistically possible to get lucky and win the lottery. It is statistically possible to get lucky and win the lottery twice. It is NOT possible to get lucky and win the lottery 97 times in a row. That has never happened, and will never happen to anybody, unless they manage to rig the outcome somehow. There is a greater chance of the entire earth being swallowed by a giant pink space-faring toad in the next 5 seconds than there is of anybody randomly winning the lottery 100 times in succession. The universe will END before this occurs. The amount of people that lose money in the markets day after day is so consistent and so overwhelming that it cannot possibly be random. It is not the equivalent of winning 30 bets in a row in that game I talked about earlier, it is the statistical equivalent of winning 10,000 bets in a row. Every new trader that opens up an account blows through that money quickly and consistently. That money has to be going somewhere in a zero-sum game, it is not being destroyed or burned. It cannot be going to the exchanges or the brokerage houses in terms of fees, because otherwise those companies would eventually end up with all of their customer's money. (This would be the case if the market was truly random with nobody making or losing money, but where people were just bleeding money to the exchanges and brokerage houses with every trade.) Since those companies are not making vast quantities of money that equal all of the losses that most people incur, we know that this is not occurring. Therefore, it MUST be going into the accounts of winning traders - that is the only possibility. Take a look at Las Vegas. Are you seriously so stupid that you believe that the casinos are taking money from their customers because they are just LUCKIER than the people who walk in the doors? Of course not. Those games are statistically rigged, and it is impossible for a casino to lose money if they keep their bet size small enough and place enough bets against enough people. Over millions of bets, the chances of a casino losing money in a year because all the shmucks just got "lucky" is just about exactly ZERO. It is not random, it is because they have an edge. You don't have to find a system that wins on 100% of bets to prove that the market is not random, you just have to understand basic Grade 10 statistics and realize that trading is a zero-sum game in which most people are bleeding out money like water. The way that money is being lost in the markets by a vast majority of participants is very similar to what is going on in Las Vegas. The losing traders are the customers, and winning traders are the house. In fact, I would be that it is being lost faster and more consistently in the markets than people are losing when they walk into a casino. This is for all intents and purposes, statistically impossible in a zero-sum game that has a random outcome for each bet. Ergo, the market is not random. Ever notice how the only people who think the market is random are losing traders who want to make themselves feel better about their lack of skill, or mathematicians who have never traded a day in their lives? I don't know how this stupid theory ever lasted more than 30 seconds, but I can assure you, it is definitely not random, has never been random,and never will be random. There is a lot more that I could say about all this and many other things, but after all this is a zero sum game and there is a limit to how much I feel like helping out my opponents. If you want to be silly and believe that it is all random, by all means go ahead - it is only going to help me even more in taking your money.