Hey look! The Gutless Wonder has crawled out to play. Still lacks the testes to present itself honestly, though. A shame, but understandable -- sunlight blisters wickedly. I guess it ran out of shy transvestites to bully in front of its offspring. Meh. At any rate.... Anybody remember "consumer surplus" and "producer surplus"? These are the gains-from-trade that are not captured in a monetary accounting of a P*Q transaction. They are what comprise the difference between accounting profit (a positive expectancy) and economic profit (a $0 expectancy). Conflating accounting profit into economic profit produces mush. When we trade $10 cash for $10 of ANYTHING, we gain -- and the same thing holds for the other side of the trade. What the market sees is $10||$10 -- what the individuals see is surplus: gains-from-trade. This is not the best explication, but maybe Adam Smith (via Dartmouth, via Columbia) can lend a (invisible) hand: Anybody remember a least-squares regression? Why do we have to square the errors, if we're only going to take a square root in order to finish? It's because any set of positive differences and negative differences, when measured against a midpoint, produces a 'zero-sum' outcome by construction. An Index produces such an outcome, that does not make it a game any more than a regression produces (or stems from) a game. Here's the sort of people who make this comparison: But a game is a contest driven by rules which (are meant to) control participants. There are no contested proceedings in the make-up of an Index, no rules governing behavior, and your participants have only arbitrary membership. It *ain't* a game. An INDEX is NOT a GAME. Lastly, Tournament Games produce the growing (or shrinking) payoff matrix that produces Win-Win runs in the stock market, or takes away those wins -- like when the headlines read "$1B of wealth was stripped away from AAPL shareholders today, when...." That is describing a repeated game with a provision that the payoff matrix contains a recursive element that brings past outcomes forward in time. Not a hard concept. Such a game has "memory" and those who claim a market to be "random" have to fight off the reality of the tournament nature of the market with every breath. So! Only 3 things to keep in mind, to not look foolish discussing game theory: 1) Gains-from-trade: accounting profits do not have economic surpluses (consumer or producer) 2) Whether a game is positive-sum, negative-sum, or zero-sum, depends ONLY on whether the game being played increases, decreases, or does not affect the wealth brought to the table. There is no necessary attribution for what is being traded -- it's only a label. 3) For markets, repeated trade gives us a tournament function, where "memory" of prior games (in outcomes, and in "reputation" for players) has an opportunity to produce the societal wealth gain of a rising market, or the wealth loss of a sinking market.
%% Yes that; + remember the time some one ''fixed his brakes''+ did not have them much going down the mountain-NOT a random event.They told him ''leave the casino'' Why he asked?? NO reason they said -we just dont want you here,'' LOL
%% Good trading points; investing in ETFs,+ mutual funds is a way to wealth, past 200+ years. NOT a predicition; not bank insured.Of course a smaller % made a fortune trading;some one made a million bucks+ selling ''pet rocks ''
Not unlike any high reward high risk ventures. But none of us believe it is gambling, more like blackjack or poker, our believe is with hard work we can overcome the long odds, not unlike wanting to play professional sports. Unfortunately, few of us knows when to hold and when to fold. So, for many, it ended up just like gambling, after 10-20 yrs of trying, wasted all the capitals. But we all believe it is the other guys that need to quit, not us here on ET.
I love reading your posts, lots of good points and advices. But why do you always put on disclaimers, like my broker? This is an anonymous forum, no one is going to sue you. NOT a prediction.
Prof mcginnis, a couple of years back, I tried to take a MOOC class on game theory, taught by Stanford U. Ended up dropping after the second class: Too much math, probability, statistics, group theory... Where can I get an introduction to game theory that a mom and pop math deficient trader can understand? I am trying to game the market makers that I am trading against.
%% Several reasons iron chief, i mean iron chef; so many snake oil salesmen make ''predictions''LOL. Not bank insured, not liable for any regulator, dealer, or market maker.
You should let us be our own judge. I read almost everything on this site, not difficult to tell BS from substance. Also, I tested many approaches mentioned, some actually worked, making it worthwhile to keep coming back!
I always cringe when I hear someone bring up the zero sum game nonsense. It’s a fallacy and not complicated in the usual context it’s brought up. Someone will inevitably trot out “ every transaction there is a winner and a loser, etc”. Both can be winners or losers depending on their other side of their entry. A swing trader can take profits after a nice run and sells to a scalper who scalps a few more portions of the move. Both were profitable in this case. Was the swing trader a loser because he sold “ too early?” No, he was not. If not catching the daily low/ high perfectly means someone won that transaction, that’s just silly and o don’t know what to tell you. Now, trading is far from easy and often you are competing against others with a similar time frame/ strategy, but just don’t let zero sum game be rationalization for it...
The flaw in your argument is that you assume everyone wants the same thing (to make money). When you buy bread at the grocery store, you lose money and gain bread. The store gains money and loses bread. You wanted the bread more than the money, so you won. The store wanted the money more than the bread, so they won, too. Same goes for stocks. When you buy a stock you want it more than the money (price); the seller wants the money more than the stock. Once again, you both win (get something you want more than what you had.) It is not a zero-sum game; it is a win-win game. You always get what you want and lose what you wanted less. It's not the price that is out of whack; it's your desires. You can work on that.