The Source of Profits for Day Trading
Day trading is not a zero sum game.
The Rhetoric
A game is zero sum because it only has a fixed amount of reward. It’s a negative sum game if that reward declines. Gambling is a negative sum game. Day trading is usually characterized as a zero sum game. When one day trader makes a profit, another day trader must have taken a loss. The idea that day trading is a zero sum game pervades trading advice sources. Take the following assertion for example:
Day trading is a zero-sum endeavor; it has exactly as many winners as losers. And options and futures markets, which are popular with day traders, are zero-sum markets. — dummies.com
Now, maybe I can forgive dummies.com, as it’s focus isn’t exactly investing and trading, but there are other examples as well.
Trading is a zero-sum game: Market moves aside, every dollar won by one trader comes out of the pocket of another trader. Day traders competing against Wall Streeters is the equivalent of a college football team (or Pee Wee team…
