Rhody Trader
Senior member
- Messages
- 2,620
- Likes
- 266
Just because banks and hedge funds think they are going to win all the time doesn't me they do - or even that they do most of the time.
Don't forget there are also corporates doing hedging who don't really care what the markets do.
Don't forget there are also corporates doing hedging who don't really care what the markets do.
If they're hedging, they should be winning more than they are losing or do you mean they hedge but with different markets?
So, there are always going to be winners and losers?
SOme books, people talk about nit getting harder because most trading is done by computers nowadays.
Technically Fundamental
Senior member
- Messages
- 2,810
- Likes
- 178
As far as I'm aware there are many reasons why institutions and treasuries trade and it's not all just for profit. It can be relating to business activities, cash flow, investment, hedging... all sorts.
Also that "for every buyer there must be a seller" doesn't account for skewed time between buyers and sellers
Also that "for every buyer there must be a seller" doesn't account for skewed time between buyers and sellers
Rhody Trader
Senior member
- Messages
- 2,620
- Likes
- 266
Hedging isn't about winning or losing. It's about protecting. Sometimes that means the hedge loses money. Sometimes it gains. As TF noted, there are a lot of reasons why a firm or individual is in the market, many of which have nothing to do with profit, and a lot of different timeframes.
everyonerich
Experienced member
- Messages
- 1,109
- Likes
- 43
in 2003, Bank of Japan spent more than $300 billions in a matter of few months to make sure jpy yen remains cheap relative to US dollar, so country's vital export sector could remain competitive in global stage.
pedro01
Guest
- Messages
- 1,058
- Likes
- 150
Institutional investors are not always investing to win. Sometimes, they are investing because that's what they have to do. Take a mutual fund that has to invest in a particular sector or industry. They aren't buying the components because they think they will make money, they are buying because they have an inflow of funds or selling because they have redemptions.
Same for ETFs too - they do a lot of buying/selling. An ETF based on DOW components must buy DOW components. Take a look at GAZ - pitiful performance but they have to mirror the natural gas sub index. It's what they do.
Take a look at your average mutual fund performance. They by no means win all the time or even most of the time or even half of the time. These institutions invest OUR money & charge a fee for the privilege. Why do these institutions even need to make $$$ ? They still get a fee regardless. Of course, if they do too badly there's a run on the fund & if they do well, they get more customers.
Hedge funds are different - they only make money on profits. Sometimes, after a bad run, they'll have a mountain to climb to get to the point where they can make a profit again. So the close the fund. More trades placed again without a care to profits.
As for - for every buyer there's a seller. Whilst that is true - the seller may be a market maker in which case, they get the spread PLUS they can manipulate the prices to offload stock onto muppets like you & me
Same for ETFs too - they do a lot of buying/selling. An ETF based on DOW components must buy DOW components. Take a look at GAZ - pitiful performance but they have to mirror the natural gas sub index. It's what they do.
Take a look at your average mutual fund performance. They by no means win all the time or even most of the time or even half of the time. These institutions invest OUR money & charge a fee for the privilege. Why do these institutions even need to make $$$ ? They still get a fee regardless. Of course, if they do too badly there's a run on the fund & if they do well, they get more customers.
Hedge funds are different - they only make money on profits. Sometimes, after a bad run, they'll have a mountain to climb to get to the point where they can make a profit again. So the close the fund. More trades placed again without a care to profits.
As for - for every buyer there's a seller. Whilst that is true - the seller may be a market maker in which case, they get the spread PLUS they can manipulate the prices to offload stock onto muppets like you & me
Last edited:
Masquerade
Senior member
- Messages
- 2,543
- Likes
- 284
lol....someone somewhere has lost money in this scenario. It's a zero-sum game.
If it was a zero sum game, why would anyone bother?
Masquerade
Senior member
- Messages
- 2,543
- Likes
- 284
Because it is a zero-sum game obviously. Also they consider they have an edge.
pedro01
Guest
- Messages
- 1,058
- Likes
- 150
It is not a zero-sum game. Brokers always make money & the market makers aren't doing too badly either.
If it was free to trade & there was zero spread - then it would be zero sum.
So, you're saying that in the long run, no trader makes money?
Masquerade
Senior member
- Messages
- 2,543
- Likes
- 284
Not so sure if brokers and market makers always make money. They do make money from commission and spreads but unless they balance their books perfectly for exposure to risk they run the risk of getting caught with unexpected events and this doesn't need to happen often to really hurt a company.
us retail traders, of course. that's why they advertise so hard - to get more of us suckers to provide liquidity for their games.
- just kiddinah, but is there a potential seller for every potential buyer (and vice versa)? it's the potential we have to keep in mind, not just the transactions taking place. zero sum? not ultimately, i don't think. after all, value does go up (mostly?) but price always does - eventually. so if played right everyone should ultimately be at least a small winner, as long as there's increasing value in the markets (which is currently debateable).
what's wrong is that too much money is in the hands of the few - "i believe it's our duty as retail traders to ensure the equal distribution of this wealth" - after all, there's plenty to go around and what's a couple of billion to Goldman, eh?
it's time they shared.so good trading - and trade well!
Last edited:
Masquerade
Senior member
- Messages
- 2,543
- Likes
- 284
When you buy, someone sells you the shares. If you're making profit from going long. Guess what? Someone's losing from going short = zero sum.
When value goes up as you say - there's still people selling shares.
but not every seller is selling short... and not every sale results in a price reversal. not every buyer is closing out a short sale either. if Goldman is obliged to take the other side of someone's buy trade and they lose money in the process - that's great. they make enough money on commissions alone most the time. that's what i mean. too few win too much too often.
Last edited:
pedro01
Guest
- Messages
- 1,058
- Likes
- 150
Errr... no.
Zero Sum - the sum total of the benefit to all players in the game is zero.
So - MR A makes $1000 and Mr B loses $1000 - that's a Zero Sum game.
Trading is not like that. Mr A makes $980.Mr B Loses $1020. Market maker makes $20 & the broker makes $20.
So - not a zero sum game
Another way of looking at it:
Microsoft ask Goldman to sell some of their shares for them on the market. Goldman obliges and buys the shares from Microsoft for x dollars offers them on the market for x+4 (offer) - and probably x+2 (bid). so either way, they're making money.
you come along and buy a few Microsoft shares and because Microsoft is such a good company working really hard at increasing it's value to shareholders, the price goes up. so both you and Goldman 'win'. but this is not enough for Goldman, so they get their proprietary traders to go after the cash (they used to be able to do that before they sold the shares to you but it's illegal now). so they chase up the price by buying up other Microsoft shares on the market after they have sold them to you - which is great in the beginning. this gets other traders and retail traders jumping on board because the price is going up. then, when Goldman is satisfied for whatever reason, they sell (while people are still buying) and make a killing dumping all their shares. suddenly the price starts falling, people panic and sell and short sellers (probably Goldman again) then jump in and start pushing the price down even further to the point that eventually you who bought in the beginning are also forced out. once Goldman have made another killing, they offer the shares back to the market again. and so the cycle continues. meanwhile, you the retail trader, are sitting on the sidelines dazed and punch drunk from the ordeal and wondering wtf just happened.
moral of the story - if Goldman wasn't such a greedy *******, you would have been fine, they would have been fine and everyone else would probably be ok too - as long as Microsoft pulled their weight and you hadn't bought shares in Fan or Fred.
so basically, if it weren't for the greed of the market makers and short sellers (the carrion feeders) and the subsequent fear of them, the markets would be a very different place...
Microsoft ask Goldman to sell some of their shares for them on the market. Goldman obliges and buys the shares from Microsoft for x dollars offers them on the market for x+4 (offer) - and probably x+2 (bid). so either way, they're making money.
you come along and buy a few Microsoft shares and because Microsoft is such a good company working really hard at increasing it's value to shareholders, the price goes up. so both you and Goldman 'win'. but this is not enough for Goldman, so they get their proprietary traders to go after the cash (they used to be able to do that before they sold the shares to you but it's illegal now). so they chase up the price by buying up other Microsoft shares on the market after they have sold them to you - which is great in the beginning. this gets other traders and retail traders jumping on board because the price is going up. then, when Goldman is satisfied for whatever reason, they sell (while people are still buying) and make a killing dumping all their shares. suddenly the price starts falling, people panic and sell and short sellers (probably Goldman again) then jump in and start pushing the price down even further to the point that eventually you who bought in the beginning are also forced out. once Goldman have made another killing, they offer the shares back to the market again. and so the cycle continues. meanwhile, you the retail trader, are sitting on the sidelines dazed and punch drunk from the ordeal and wondering wtf just happened.
moral of the story - if Goldman wasn't such a greedy *******, you would have been fine, they would have been fine and everyone else would probably be ok too - as long as Microsoft pulled their weight and you hadn't bought shares in Fan or Fred.
so basically, if it weren't for the greed of the market makers and short sellers (the carrion feeders) and the subsequent fear of them, the markets would be a very different place...
Last edited:
