DislikedTypical Trading Logic When we look at the "average trader" or unsuccessful trader their logic typically involves examining past price, developing a method, then calculating the accuracy of the method using past data, example: if the method had a 60% accuracy over the past 20 years than... "surely it will have approximately 60% accuracy in the future" <- this flow of logic always leads to failureIgnored
Unconventional Wisdom :nerd: There were 99 Professional smart traders and 1 CrucialPoint. After careful analysis of price history and technical details (fundamental et al..), They decided (all 99 of them) to buy into the market. God forbid, CrucialPoint was this nutcase who constantly has his episode of mental diarrhia (whom to some, CrucialPoint is full of shit, with very little substance and very little practical and applicable advice) and decided to proclaim to the whole world that he is going to sell against the Pro's and will make money......
As he mentioned, for price to move up 1 pip, there need to be $99 present on opposite side so these 99 buyers can be in a profit of $1 each but there is only $1 present from CP and this is calculated based on overall volume on both sides at any moment in time. Now if price move down 1 pip, then CP is in profit of $1 and the 99 buyers are in loss of $1 each, so what happened to the remaining $98? who took it from the pot? Let me remind you that for this scenario, we already confirmed there is no other players in market as of now so don't assume about future orders or existing other orders, etc.
What really happened to the $98? Is there anyone who could answer this to me please as Crucialpoint is not around anymore?
{quote} I've been giving a long and hard thought on the $1 parable post from CP. I was trying to understand the perspective from which CP is talking about it because it is crucial. When we think about market or price movement, we always think from placing the order into market and price moving. But here, the scenario or situation is we need to forget about all the existing trades, pending limit or stop orders and even future market orders. CP also mentioned the 99 buyers and himself as seller are already in market because he clearly told that the...
1. 99 traders go long with $1 per pip.
2. CrucialPoint goes short with $1 per pip.
3. The market moves down 1 pip.
Now, the movement in the market means that CrucialPoint earns $1. Conversely, each of the 99 traders loses $1, which gives us a total loss of $99 across the board for the long traders.
So, where does the extra $98 go?
In reality, this scenario is a simplification. In a real-world scenario, markets require liquidity (i.e., a counterparty) for every trade. When the 99 traders decided to go long, they needed someone to take the opposite side of their trade. In this hypothetical, CrucialPoint is the only one providing liquidity on the sell side, but in reality, the liquidity for the 99 buyers would have to come from multiple sellers (or one seller with a very large position).
In this thought experiment, CrucialPoint's $1 is not enough to provide liquidity for all 99 buyers. But for the sake of this scenario, if we assume that somehow he does provide liquidity for all the buyers, then he would gain the entire $99 when the market moves down one pip.
The extra $98 doesn't disappear into thin air. It's essentially a transfer of wealth from the 99 traders to CrucialPoint. The $98 represents the combined losses of the 99 traders, and CrucialPoint, being the counterparty to all of their trades, would gain that amount.
To conclude, the market is a zero-sum game. One trader's loss is another trader's gain. The $98 doesn't vanish—it's just in CrucialPoint's pocket now.
