quite honestly I'm not really interested in trading anymore (other ventures have my interest nowadays) I was just throwing out an amusing idea that I had and all those guys who got worked up need to have their heads checked
I suggest you read some Harris (http://www.amazon.com/Trading-Excha...1825260?ie=UTF8&s=books&qid=1187848360&sr=8-1) In a nutshell, the risk of asymmetric information will be priced into the bid/ask spread. What you see is in the long run anyone without an edge will lose, a combination of finite capital (this will cause one to lose sometimes even if they do have an edge, just lack of capital to handle a perfectly normal deviation) and costs of trading (for the average loser this is mostly in the form of comissions, but b/a can also be significant)
also consider the change in the 'loser's' market impact, and your ability to compete successfully for the other side of his trades
hey avid, i think there's a very valid point to you what you have stated. One of the few things that will work against you is the spread, taking the opposite side of the trade means you need to buy at ask or sell at bid. And then, the idiot might overtrade and hit you in commission. I think the money maker here is that most newbies will let losses run and cut winners short. If you have the reverse, then you almost have made the perfect money management system.
right, unless you know his ideas immediately before he places his orders, you're probably paying the spread (assuming you aren't his exclusive market maker in some secondary market situation) like you said, if he trades too often that's a cost for both parties. i was thinking it would also be impossible/unlikely to take more than he's losing after commissions. you could only expect to capture a part of that without some other revision to the basic strategy. if you're sized bigger you've got more market impact and now outweigh his trade. does he have negative edge, or just no edge? i guess that's the original question. does the typical newb have negative edge... they probably do like you're saying, from the psychological resistance to loss