I dont think you can always call it zero sum game. If you have a losing stock, and owners sell consecutively to next owner, each time it dropped in price, everybody is a loser except the last, which is the current owner who holds them in his account and has not booked profit/loss. The outcome for him is open. But all of its former owners are losers. Including the IPO. The company that went public lose too because its stock valuation decreased over the years. So EVERYBODY lose except the current owner loses because he hasn't booked profit/loss. Futures trading maybe a zero-sum game but I am not yet a futures trader so veteran futures trader please comment. This is very academic and detailed and in my opinion worthy of discussion because without it trading is futile.
Once upon a time I made a lot of money trading equities. I made enough to leave a fairly lucrative and stable profession for which I was trained and held a post graduate degree. You have posted your question in a section of Elite Trader called Trading for a Living. I am no longer concerned about making "all" the money as was the term used in your question. That title describes what I am attemptimg to do perfectly, I am simply concerned about making a comfortable living. And trading has allowed me to enjoy a standard of living that I never could have realized if I had stayed in my former profession. I have NEVER traded anything but equities. I know NOTHING about futures or options. I daytrade mostly. I only trade NYSE big cap listed stocks. I trade the SAME couple of stocks each day. I simply try to take advantage of the natural rhythms of the market, taking whatever side of a trade that I believe will be profitable. I have a pension and nice health insurance plan from my former profession. I really could do well enough without trading. But I still LOVE to trade and I look forward to trading the open each day.
Trading is a negative sum game, in that brokers are constantly taking money out of the market, so the wins + losses always have the commissions subtracted from them. Having said that, there is more than enough left over to create consistent winners. 10% of traders consistently make money in the market, and some make a lot of money. Read Market Wizards if you want to learn about a few of them.
I have seen guys trade the stock and futures markets who were making insane amounts of money. There are places where they have buildings with entire floors full of these guys. Because I have seen this for myself I now tend to think of the stock market more like a pyramid scheme. There is a small group of people at the top raking in tons of money then there are millions of people at the bottom paying/losing money.
That's exactly what it is. Except unlike a pyramid scheme, you can become one of the successful guys at any time, not just by joining early. Everyone has more or less the same chance. You can compare it to pro sports... lots of people play tennis on the weekend, very few people play tennis professionally. If you want to succeed in trading, you have to be the best. It's not good enough to be "kind of OK" at it, you have to be better than at LEAST 9 out of every 10 people at it. If you can do that, you can make consistent money. The reason that the markets work the way that they do is that the vast majority of human beings live in self-created dream worlds. They don't want to see reality, which is the fact that they are a bunch of stupid sheep who don't have a damn clue what they are doing. They think that trading profits are "just around the corner", if they only change one little thing here or there. It's a lot harder than that, and most people can't accept that. So they go out and blow their money by basically trusting to luck (which never works in the long run), and get taken to the cleaners. The media perpetuates this problem with its constant lying and misrepresentation about what is really going on in the market and what is driving it, which results in the average person being fleeced like a sheep.
Ticketwatcher, Appreciate your reply. My point is: most people tried to turn newbies away because they will lose$. If that is so, who canbe successful ? You demonstrated that not everyone lose and a few do win this game consistently, to make a comfortable living as you have stated. If you are a newbie please read this both ways. One is someone wins. Two is how much you can afford to lose first. BTW: I have not gotten to the point of "trading the open" yet, and stuck to watching how things shape out first before committing a trade. If you care to share your thoughts privately please PM me.
YOU can be successful. Everyone that ever succeeded in this game started out as a newbie, and everyone lost money at some point. The trick is what happens after that... are you willing to put in 5000 hours of work? If so, you have a shot at it... but there is no guarantee of success even if you spend years trying to make it. Think of it like making it as a successful entertainer... most professional actors and singers struggled for years before making it big, and the vast majority never do. Those are about your chances, but that doesn't mean that you won't be able to do it, and don't let anyone discourage you if you really feel up to it. Just don't underestimate the effort involved - it really has to be almost an obsession for you to be able to put up with the struggle.
As to you your first point, I may have been fortunate as to when I started trading. I started actively trading in the early nineties and I simply rode one of the greatest "bull" markets in history. In those days, I NEVER shorted which was a wise thing. I have NEVER blown up. I did lose 13 k in one day three or four years before I started trading for a living which was a long time ago, as in January I will start my 12th year of trading for a living. But I was able to right myself on that loss in less than six weeks. As far as how much can one afford to lose, I cannot answer that question. But I played D 1 baseball, and I think trading is a lot like baseball. Hitting a baseball is a SIMPLE thing. But it is also a DIFFICULT thing, not everyone can do it at a high level. I could not hit well enough to go to the next level which was professional baseball. There are lot of people who could not hit well enough to get to the level I got to. Trading is a lot like hitting that baseball. One either has the inherent mix of intellectual qualities and psychological qualities or you don't. As far as trading the open goes, one of the most instructive threads on this forum is the opening orders thread which has Don Bright and a few other very seasoned traders much more skilled than I offering up what they did on the open. The open offers an oportunity to make some money each day because there is more movement or volatility at the open which is always an opportunity for the seaasoned trader. Basically, I am looking to place an order in advance of the open to take advantage of buying a gap down or shorting a gap up. It can be quick money. Old timers might term this as getting on the side of the specialist, although NYSE is now more electronic now, and that statement is outdated. But nevertheless, I at least am looking to make some money in the same that same way. If you understand what you are doing, then if your order gets filled, the worst you will do is make a lateral trade.