The incentive to profit lures in day-traders. Day-traders provide liquidity which lures in fundamental investors*. Fundamental investors make prices (more) informative. Informative prices send accurate signals to economic agents which helps them best choose amongst scarcity. The act of creating informative prices is a critical economic service because distorted prices lead to the misallocation of scarce resources which destroys wealth. So yes, day-trading is a productive activity. Albeit, indirectly. *By fundamental investor, I mean *informed* fundamental investors - profitable institutions, hedge funds, banks, large independents.
Didn't realize the part of retail traders in liquidity of the "trading food chain/cycle". I hope that's true. But isn't HFT in danger of marginalizing the need for retail traders? Not to mention the number of retail traders have increased exponentially in the past 20 years. Something like 75 million retail traders worldwide with a lot in the U.S. So every other neighbor one has in his "middle-class" neighborhood could be trading, or trying to trade on the side, and one may not even know it. Of course, it's a bit of private endeavor as most friends and acquaintances wouldn't reveal what they trade or how, or even if they trade or not. As for me, I hope to profit enough to start some kind of business unrelated to trading in the future. I have to admit, I believe retail trading doesn't help the GDP. I would admit if people pressed me, that I'm just a "trading bum"!
So you are basing your reasoning on legality. This changes as time passes as laws are not static. I'm not saying traders are pickpockets at all, what I am saying is that people seem to have this illusion of efficiency. In reality, 90% of politicians do little to nothing, vote as they are told and collect a huge paycheck; working classes do jobs that could be easily be automated but are only kept because of government subsidies. The question in 2011 is - we could substitute people with technology relatively easily but what to do with those masses of people?
There are lots of benefits to trading. First, character development. Trading is the best mirror I've ever used to see what was inside of me. And after dealing with it, I'm a better person. Second, if I didn't trade, all those poor people who are suffering from heart attacks because their stock dropped X% wouldn't have someone to sell it to and they'd be stuck in their panic state. I'm giving them peace of mind by letting them sell it to me(until they realize they sold it at the bottom). Third, I'm not big on taking out loans and going into debt, and my five figure job isn't going to get me the starting capital to fund patenting my inventions or starting charitable orgainzations. Those will be funded by the generous contributions of bad traders. The idea that we're parasites comes from jealousy and a misled assumption. People who are poor want to be rich so that they don't have to work anymore. That's why they never become rich; their desire is rooted in a desire to be lazy. So obviously, when they look at traders, they see someone who is achieving the ability to be unproductive and they label it "parasite." They don't understand the idea of becoming rich so that we can work even harder and make a bigger difference in the world. It's an inability to see around "working for money" to "having money work for you." Stick to your guns and keep doing what you love. Someday you'll find yourself with more than you can contain and some of those people who called you a parasite may thank you for your generosity. Who knows?
Very nice analysis. We're not the most productive job out there, but by far not the least. At least we add some positive to society, which many lawyers, government workers, and many cogs in many organizations cannot say. One major thing: we're supporting ourselves, which means we don't take jobs in other areas that many other people are competing for. Just to even get a "productive" job is hard and we make it easier but not being in line. Edit: Also saw many people who said we pay taxes. Ditto. To me, government workers and people who get handouts from government are the true definition of a parasite because they cannot support themselves at all. Yes, some gov jobs are necessary and some people really have it tough, but it's very bloated nowadays. Everyone else needs profit to survive.