I am talking about Positions, while you are Straw Maning and talking about Trades. For every Long position in the stock market there is not always a corresponding short position. While in the Futures market there is always a Short position for every Long position. This means when the SP500 falls say 20%. For ES traders, account values transfer from one account to another. While for stock investors, 20% of the value of many accounts can just vanish to nowhere.
so the person that sold you that stock that went down 20% did not lose that 20% he avoided that unrealized loss. he benefited from your drawdown by not participating. if i give you $10.00 i am now short $10.00 you may invest that $10.00 and make 1mm and i lost that potential for gain.
Just trade the market, don't get too technical. Leave that stuff to the engineers and scientists developing the backend. Sometimes, ignorance is indeed bliss. To be a great sports player or artist or trader you don't need to know how the ball and equipment are engineered. You just have to know how to use them very well.
I think first principals is easiest to explain this. 10 people own stock ABC and it is at $20. 1 person puts a bid of $18 and 1 person decides to sell. The other 9 people sit on the sidelines. 10 people lose $2 when it goes to $18 (the 1 that sold and the other 9 that did nothing), 1 person is flat as they bought at 18 from cash and that is the current price. $20 was lost in total. Just think of a small group of people and play out scenarios. If the market falls 99% tomorrow the wealth definitely doesn't just transfers. I don't see for equities how zero-sum could be true.
Owning equities is owning a part of a business. The value is determined by how well the business does. If the business fails the price will drop.
Loved this chart. Picking up pennies in front of a steamroller XIV was easy money until Volmageddon. And then stories of retail depression. That was also the last time the public liked Trump.
I don't get how this thread is so controversial... this isn't like choosing your favourite colour, trading is always a wealth transfer. Can work well because you get to share in real wealth creation by other companies and companies raise cheap finance. Can work against you because you've had the rug pulled. If a new crypto coin goes up to 100x from zero, no wealth has been created. Nor is anyone richer. It only happens when they realise it - ie sell it to another punter whose capital is now tied up in that position. If it goes up another 100x and no other trades happen, nothing happens until that punter sells to another. etc
So when Nvidia ran up 100x no wealth was created? Increased share values and unrealised gains in stocks can be used to acquire even more assets, it is generally considered a real increase in wealth.