The other side

pedro01

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I see a common theme in a lot of threads is that a lot of people think there is 'someone' on the other side of their trade taking the opposing view to them. That there are 'pro's out there that are actively taking you out of trades.

I'd say that this, in many occasions, is just not true. Many times, trades take place without thought to profit on that trade. The 'other side' might just not care at all what profit they make on the trade.

In FOREX, there are billions of dollars of transactions per day just because businesses around the world transact with each other. Even in my small business, we usually do about $110K in forex transations per month. This is simply wire transfers between banks. At no point, do we tell the senders to hold off because of the 200 EMA or tell them that the stochastics is looking oversold so better move quick.

In FUTURES, there is a lot of speculation but the futures are also used for hedging. Again, the hedge is not about making money on that transaction. In fact, if a hedge is placed and it proves that the hedge was not actually required, then a loss willl be made on it as it would with any insurance.

In STOCKS, you have Unit Investment Trusts - these ETFs are usually passive index trackers - like the SPY. The people running these funds have a goal to stay close to the underlying index (although rules for dividend accumulation mean they lag to some extent). They get paid a management fee, they don't care per transaction whether money is made or not. It's more complex than this and there are APs whose job it is to take arb opportunities to close the gap between ETF & underlying but basically blocks of shares in the underlying are brought/sold from time to time without thought to profit.

Mutual funds and actively managed ETFs are not like UITs and in their case, they do need to perform. Once again though - if they have a new influx of funds or if they have redemptions, then MUST transact. In the case of redemptions, they must get out that day, once again, a redemption transaction is not made with a thought to profit.

Statistical Arbitrage (OK - pair trading) buys 1 stock and shorts another. It does not matter if the buy rises and the short falls. In fact, the buy could fall and as long as the short falls further, they make a profite. Only the closing of the gap is that they need. So again, they don't care if one particular side makes a profit.

So - stop being paranoid. They might not be out to get you after all.

Pete
 
Absolutely. There is also a kind of prevailing mythology that the "professionals" make their money mainly by duping a gullible "public". The problem is that the "public" is way short of being able to provide the liquidity in modern markets. The "professionals" trade with each other more than anything else ..... because there is nobody else to trade with.

It's a bit like the reason that managed funds on the average don't beat the market - because they are the market.
 
Usually, as far as a retail trader is concerned, the person taking the other side of their trade is doing so because that's their job - making a tradeable and orderly market.
 
Usually, as far as a retail trader is concerned, the person taking the other side of their trade is doing so because that's their job - making a tradeable and orderly market.


Well - of course there are MMs involved but I discount them for the purpose of the larger argument which is that a lot of volume comes to the market for reasons other than 'beating the retail trader'. In fact, I'd say most of the volume (certainly in forex) comes for reasons other that Joe Blow and his 30 Google shares.
 
"Absolutely. There is also a kind of prevailing mythology that the "professionals" make their money mainly by duping a gullible "public". The problem is that the "public" is way short of being able to provide the liquidity in modern markets"

thats an interesting point you have made dcraig1 :idea:

later

Andy
 
mmm, maybe not the direct trades of the public, but the equity market is moved by public money. If they decide to point their savings in that direction then the institutions they entrust it to have to put it somewhere and buy even if their trading arm is busy selling.

good trading

jon
 
mmm, maybe not the direct trades of the public, but the equity market is moved by public money. If they decide to point their savings in that direction then the institutions they entrust it to have to put it somewhere and buy even if their trading arm is busy selling.

good trading

jon

Agreed. There is a stupendous amount money in managed funds, pensions funds etc. Ultimately I should think that this is one source of the profits made by profitable hedge funds, trading banks etc. But it's all rather more complicated than the professionals vs Joe Public.
 
Well DA SB both provide a platform as a means to trade....who cares weather the trade is into the market or against the S B provider....I don't care who's money I take !

It's not an argument that I want to buy into but I've always thought that it is a bit telling that spread betting profits are tax free. Could it be that the Revenue's assessment is that they would be giving back more by crediting spread betting losses against other capital gains than they gain by taxing the profits? In other words most lose.
 
It's not an argument that I want to buy into but I've always thought that it is a bit telling that spread betting profits are tax free. Could it be that the Revenue's assessment is that they would be giving back more by crediting spread betting losses against other capital gains than they gain by taxing the profits? In other words most lose.

Yes that I expect is absolutely the case...the majority of SB'ers I would expect are entry level (traders) I use the word loosely :) but there are many reasons for competent traders to use S B.

eg second income...non taxable as it's considered as gambling...I prefer the word speculation...but there we are.
second income tax free even if you are a DA full time trader...SB is the hobby account ..:LOL:

Anyway you get the idea :)
 
Could it be that the Revenue's assessment is that they would be giving back more by crediting spread betting losses against other capital gains than they gain by taxing the profits? In other words most lose.

I think it is more to do with the UK government scrapping tax on winnings gained from gambling as it falls under the same umbrella.

But I agree that if you could offset losses then there would be a lot of tax avoided. However, the number of losers using DA is probably not much better and losses can be offset against tax.


Paul
 
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