for every buyer there is a seller

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Old Aug 25, 2009, 11:28am   #1
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for every buyer there is a seller

If winners rely on losers in the open market, banks obviously think they are going to win all the time or they wouldn't have trading departments, which begs the question, who is losing money?
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Old Aug 25, 2009, 12:36pm   #2
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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.
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Old Aug 25, 2009, 12:39pm   #3
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Originally Posted by Rhody Trader View Post
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.
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.
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Old Aug 25, 2009, 12:54pm   #4
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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
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Old Aug 25, 2009, 3:59pm   #5
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Originally Posted by SanMiguel View Post
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.
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.
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Old Aug 26, 2009, 5:53am   #6
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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.
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Old Aug 26, 2009, 7:50am   #7
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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

Last edited by pedro01; Aug 26, 2009 at 8:22am.
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Old Aug 26, 2009, 8:31am   #8
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If you buy something and make money it does not mean the person who sold it looses money, they may have reaced profit target already. If you sold for a loss that is only your own fault.
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Old Aug 26, 2009, 9:42am   #9
 
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If you buy something and make money it does not mean the person who sold it looses money, they may have reaced profit target already. If you sold for a loss that is only your own fault.
lol....someone somewhere has lost money in this scenario. It's a zero-sum game.
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Old Aug 26, 2009, 10:29am   #10
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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?
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Old Aug 26, 2009, 10:45am   #11
 
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If it was a zero sum game, why would anyone bother?
Because it is a zero-sum game obviously. Also they consider they have an edge.
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Old Aug 26, 2009, 10:51am   #12
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lol....someone somewhere has lost money in this scenario. It's a zero-sum game.
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.
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Old Aug 26, 2009, 10:51am   #13
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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?
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Old Aug 26, 2009, 11:06am   #14
 
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Originally Posted by pedro01 View Post
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.
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.
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Old Aug 26, 2009, 12:07pm   #15
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which begs the question, who is losing money?
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 kiddin

ah, 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 by Schixm; Aug 26, 2009 at 12:18pm.
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