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Who do you trade against?
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Created: by TheBenefactor Attachments:0

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Who do you trade against?

  #11 (permalink)
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TheBenefactor View Post
My main reason for speaking of the "against" scenario is that I see many new traders take positions without regard for risk


So do I - beginning traders are prone to do that, because they haven't yet learned or experienced that trading is all about risk-control. But that knowledge and experience doesn't give me anything like your adversial frame of reference and perceptions. I suspect that probably comes mostly from your time on the floor of the NYSE.

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  #12 (permalink)
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Rory View Post
This may seem harsh but it is a very good question.

Its a zero sum game in Futures. You win, others pay for that. Whether is a 0.0000001% drop in their overall portfolio income or a guy who has a girlfriend and screaming baby in the next room.

This isn't strictly true, particularly when it comes to physical commodities. Take a simple long case: commercials may be selling while you're buying for any number of reasons. Sure they might make *less* than had they sold at a different time but their needs are different than your needs. An entity producing a physical product which then goes short a strip of oil contracts has a bottom line they're trying to meet and whether they sell CL at an average price of 48$ or 50$ might just mean the difference between 500M$ in net profit vs 550M$ in net profit.

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  #13 (permalink)
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  #14 (permalink)
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i960 View Post
This isn't strictly true, particularly when it comes to physical commodities. Take a simple long case: commercials may be selling while you're buying for any number of reasons. Sure they might make *less* than had they sold at a different time but their needs are different than your needs. An entity producing a physical product which then goes short a strip of oil contracts has a bottom line they're trying to meet and whether they sell CL at an average price of 48$ or 50$ might just mean the difference between 500M$ in net profit vs 550M$ in net profit.

Without conceding, I would state that I regret addressing the is/is not zero-sum point simply as its one of those never settled one-man's-opinion things. Also I hurt my back so I'm on pain meds tonight and writing out of boredom

In retrospect I should not have assumed every reader would grasp I was referring to futures speculators. The ecosystem of market players (and the exchange/house(s)) mean you could pull a dozen of similar examples and I could as many or more that counter or negate those... however its mostly true I believe. After hashing out on the scalper's journey thread a short while ago, zero or negative sum for futures speculators seemed to be the informed consensus. Or the other guys gave up, who knows.

For true commodity hedgers (for whom the futures markets were created) its not a zero-sum game. They buy and sell large lots but operate largely in parallel, not strictly profit minded as a speculator is, just speculators gain or lose their stops etc. as the hedgers get in or out. Stocks are also not a zero-sum situation.

Futures are defined in many (possibly reputable) places as a classic example of zero-sum game (for futures traders who compete against each other over time). Strictly speaking its of course problematic due to inter-market liquidity flows and such open to interpretation but whats not? "In a zero-sum game, the problem is entirely one of distribution, not at all one of production" to quote Kenneth Waltz.

I would still argue mostly true for speculators, particularly average retail speculators. It has a game-like structure and rules. b. Its not a game of pure chance as unskilled speculators generally hemorrhage money as they enter the market in predictable clusters and more experienced large players can knowingly trap them and take their stops out. Inltecap's retail bus trade for example. That they are sometimes just trying to get a fill is irrelevant, in the operation of any game a player can lose by poor understanding and essential strategy as much as being preyed upon by smarter folks.

Given enough time to separate statistical out-liars from skill it seems clear that a few percent do indeed re-distribute to their benefit and not re-invest (like the business, home and car I just bought) so net gain.

I'm tired, sorry if this makes no sense The one thing I do find interesting about the is/not debate is how it seemingly divides into the logical fact finding debaters and the mostly emotional argument camps. Dunno.

Regards,
Rory

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  #15 (permalink)
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Rory View Post
I'm tired, sorry if this makes no sense The one thing I do find interesting about the is/not debate is how it seemingly divides into the logical fact finding debaters and the mostly emotional argument camps.

I do mostly agree with your points although I would add there are ways to provide liquidity and/or potentially benefit from commercial flows but they don't involve trading front month spec futures. Unfortunately that's what most traders gravitate towards though (spec gun-slinging).

Also within the realm of "financial" futures (indexes, etc) it's definitely more of a zero sum game IMO.

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  #16 (permalink)
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i960 View Post
I do mostly agree with your points although I would add there are ways to provide liquidity and/or potentially benefit from commercial flows but they don't involve trading front month spec futures. Unfortunately that's what most traders gravitate towards though (spec gun-slinging).

Also within the realm of "financial" futures (indexes, etc) it's definitely more of a zero sum game IMO.

Totally fair. Edit: Indexes vs Commodities . Indexes feels more like betting on two flies walking up a wall than anything that provides society with much utility Ok, I grasp to some degree the whole 'finding value' function of speculators etc. but.. Indexes seem much more morally suspect

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  #17 (permalink)
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One of the most instructive videos I have come across regarding pure-future contract trading for the retail trader came from this video...(My apologies on the "ads" in the video. I neither condone nor recalcitrate the advertiser of the thing. I just think it's a great educational tool, done very well for newer future traders to understand, in getting to the basics).

https://www.youtube.com/watch?v=Yqkq-w4Jl3c

It's almost as easy to understand as the one I saw some time ago which used cows as an example. That was the best one I ever saw. Can't find that one though.


Last edited by HoopyTrading; July 23rd, 2016 at 10:05 PM.
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  #18 (permalink)
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HoopyTrading View Post
It's almost as easy to understand as the one I saw some time ago which used cows as an example. That was the best one I ever saw. Can't find that one though.

Its very elementary but certainly useful to quickly explain Futures to non-traders, cheers!.

Anyone who opens a live account while not already understanding this.. I for one choose to presume they intend to give us their money for safe keeping and re-coup it in the trickle down. I hope they also work at Papa Johns, I don't like Dominos so much

Rory, taking Futures money from the egits since 2014 & shortly to give their money to Options traders.

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  #19 (permalink)
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I dont trade against anyone. I trade with people. Sure we are all competing for the best prices, even still a trade is a choice made freely between its participants. Both get what they want at the time, in my eyes its the fairest kind of transaction, therefore I don't describe it with a more conflicting word like "against".


"The symbol of all relationships among [rational] men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. A trader does not squander his body as fodder or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtues, in payment for his own selfish pleasure, which he receives from men he can respect. The mystic parasites who have, throughout the ages, reviled the traders and held them in contempt, while honoring the beggars and the looters, have known the secret motive of their sneers: a trader is the entity they dread—a man of justice." - John Galt (Atlas Shrugged - Ayn Rand)

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  #20 (permalink)
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RielA View Post
I dont trade against anyone. I trade with people. Sure we are all competing for the best prices, even still a trade is a choice made freely between its participants. Both get what they want at the time, in my eyes its the fairest kind of transaction, therefore I don't describe it with a more conflicting word like "against".


"The symbol of all relationships among [rational] men, the moral symbol of respect for human beings, is the trader. We, who live by values, not by loot, are traders, both in matter and in spirit. A trader is a man who earns what he gets and does not give or take the undeserved. A trader does not ask to be paid for his failures, nor does he ask to be loved for his flaws. A trader does not squander his body as fodder or his soul as alms. Just as he does not give his work except in trade for material values, so he does not give the values of his spirit—his love, his friendship, his esteem—except in payment and in trade for human virtues, in payment for his own selfish pleasure, which he receives from men he can respect. The mystic parasites who have, throughout the ages, reviled the traders and held them in contempt, while honoring the beggars and the looters, have known the secret motive of their sneers: a trader is the entity they dread—a man of justice." - John Galt (Atlas Shrugged - Ayn Rand)

An interesting choice of quote . Regrettably the writings of a phenomenally damaged woman who died alone.. so big old grain of salt. There was a real attempt to create Rand's "Galt's Gulch" in Chile where the best of humanity could live apart from the grubby and tyrannical in an idealised pure-capitalism utopia. It did not work out so well as you might expect in the real world. Ayn Rand's Capitalist Paradise Is Now a Greedy Land-Grabbing Shitstorm

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