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What do we do as Traders?


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What do we do as Traders?

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  #1 (permalink)
Calgary, Canada
 
Experience: Intermediate
Platform: Ninja
Trading: Stocks
 
Posts: 14 since Jan 2012
Thanks: 6 given, 7 received

Big Mike's post about how you present yourself to other people as traders and the negative impression you leave on them inspired me to write this post.

What's a best way to explain how traders add value to the system?

I say to other people that companies like Google and Apple wouldn't have been able to created products that everyone loves without investors who in turn rely on traders to unload their shares for profit. No one would risk money on IPOs if traders were not there to back them up. No IPOs means no companies of sizeable nature to develop highly advanced products that changes the industry.

Also that companies need efficient futures market to run their production by hedging to keep the cost down or simply don't go out of business from the commodities fluctuation. The traders taking risk keeps the system liquid and function in a free market environment to avoid price fixing. That cost is paid by the losers, unwillingly of course.

Now, I know traders don't think any of these stuff when they trade, much like 90% of the people in the world stuck in a job who rarely contemplated how their work adds value to the world. I bet you most are concerned with when they get to go home and when their next pay cheque is.

I am biased and maybe these explanations are too far fetched and not entirely true. But trading is legal and it's legal for a reason IMO. Increased in trading market over the past few decades; acceleration in speed of innovation and advancements around the world, correlation or causation? I bet most people on this forum will answer unanimously.

I think trading gets such a bad rep because in the hierarchal structure of finance and money, the activity of trading in comparison to other forms of work and compensation dogma is like comparing apples to oranges. Our business is at the pinnacle of the financial pyramid. Trading is where you cut all the BS that takes in making money and you grab straight from the molten lava of money that's behind the scenes of the companies, governments, and private individual lives. We are also free to lose it without limit as well.

This is why discipline is number one rule in trading because unlike other professions where daily BS might restrict people from achieving a great deal, that same BS component also protects people from getting reckless.

Getting back onto topic, it's really hard to explain these concepts to someone who sees trading as an international casino scene. Even traders have to think hard about how their job adds something back to the system of any value. For the most part, capitalism has no global goal except that each small unit of the economy tries to work itself out to benefit itself, and that in return drive the bigger picture. Thinking too deep and philosophically probably don't help you trade better though.

What do you guys think. Is my explanation to people with no market knowledge about trading flawed?

Also, all those people that gives you a pity stance when they realize you are a trader, I bet you their disappointment is not based on any higher social value but rather its because they themselves had once failed or don't have the guts to do what you do. Simply put, they are jealous but wants to feel better by condemning such profession. If you give them a system guaranteed to make money, they will take it in a heart beat without ever turning their backs (social morale issues? no time for that!). But until such opportunity falls upon them, they sure as hell hope you don't succeed in the mean time because that would cause them unimaginable life's pain.

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  #3 (permalink)
Northern Germany
 
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There is already a thread on that:

Do you admit to being a trader?

This post sums it up quite nicely:

Local Trader

vvhg

Hic Rhodos, hic salta.
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  #4 (permalink)
Oslo, Norway
 
Experience: Advanced
Platform: CQG, Excel
Trading: CL
 
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Posts: 1,198 since Apr 2010

Yes, this has been discussed before, but your description is correct.

Traders'/speculators' function is to take on risk, which in turn provides liquidity.

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