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Why do you say it's a zero sum game? If I've learnt anything from my time in finance, it's that the market is definitely not zero sum. The prices you see repres

by osrec 9y ago

Why do you say it's a zero sum game? If I've learnt anything from my time in finance, it's that the market is definitely not zero sum. The prices you see represent sentiment, not a hard valuation, and someone isn't necessarily losing when you gain. If you really think about it, even entire economies aren't really zero sum as our method of valuation is intrinsically subjective!

legolas2412 9y ago
If you aren't changing the sentiment, then it is a zero sum game based on the current sentiment. Adjusted to average growth of stock market (and inflation), it is a zero sum game. You aren't creating value by predicting the future. Just like you don't create value when you predict which lottery ticket will win.
- lrem 9y ago
  As it turns out, there are at least 2 ways you can create value to society here: 1) Reduce spreads. 2) Stabilise prices. Now, whether it makes any sense to put to work all those bright minds for these purposes, is a question the society should have asked some time ago...
danmaz74 9y ago
I think that the OP meant that the speculation part (trying to buy low and sell high to beat the market) is a zero-sum game. On the other hand, this zero-sum game helps companies raise capital to make real investments with real returns, and that part isn't zero-sum.
- lowpro 9y ago
  What I meant was HFT as I (and how I think the 'common person') understands it is that trading is basically a zero sum game since trading doesn't really help a company raise money over very short time periods, but investing is not a zero sum game where you're looking for stocks to go up over the long term. Where I think HFT is zero sum is your competing against other HFT people to more accurately and quickly predict the future in the very near term, then buy & sell in a very short period. And since the market changes all the time, these algos must change to stay profitable over time as the competition improves their algos to beat you. Algo trading might work in markets where HFT isn't big yet, but most people won't know which markets that is or how to actually trade there, and if you get good enough to make successful models, you're basically in the industry, it's probably way more than a hobby at that point.

by osrec 9y ago

legolas2412 9y ago

If you aren't changing the sentiment, then it is a zero sum game based on the current sentiment. Adjusted to average growth of stock market (and inflation), it is a zero sum game. You aren't creating value by predicting the future. Just like you don't create value when you predict which lottery ticket will win.

lrem 9y ago
As it turns out, there are at least 2 ways you can create value to society here: 1) Reduce spreads. 2) Stabilise prices. Now, whether it makes any sense to put to work all those bright minds for these purposes, is a question the society should have asked some time ago...

danmaz74 9y ago

I think that the OP meant that the speculation part (trying to buy low and sell high to beat the market) is a zero-sum game. On the other hand, this zero-sum game helps companies raise capital to make real investments with real returns, and that part isn't zero-sum.

lowpro 9y ago
What I meant was HFT as I (and how I think the 'common person') understands it is that trading is basically a zero sum game since trading doesn't really help a company raise money over very short time periods, but investing is not a zero sum game where you're looking for stocks to go up over the long term. Where I think HFT is zero sum is your competing against other HFT people to more accurately and quickly predict the future in the very near term, then buy & sell in a very short period. And since the market changes all the time, these algos must change to stay profitable over time as the competition improves their algos to beat you. Algo trading might work in markets where HFT isn't big yet, but most people won't know which markets that is or how to actually trade there, and if you get good enough to make successful models, you're basically in the industry, it's probably way more than a hobby at that point.