And the probabilities of you succeeding won't be good, of course. But neither are the chances of a startup succeeding good either.
This dynamic is similar to gambling games like Texas Hold'em poker in a casino setting. While skilled players may consistently profit at the expense of less experienced participants, the overall wealth within the game remains constant. No new value is generated; instead, existing wealth is redistributed among the players based on their relative performance and luck. When research time and fees are added trading is largely “negative sum”.
NOTE: Some trading activities, such as market making and arbitrage, provide liquidity and help maintain fair pricing in financial markets but these operations require expensive low latency market access and are dominated by market insiders and are not possible for retail traders.
There is a fundamental difference between startups and "buy low, sell high" trading. Even if only a minority of startups succeed, they can create significant value for society by introducing innovative products, services, or technologies. In contrast, even if the majority of traders were "successful," there would be no net value created, as one trader's gain is another's loss, and the overall wealth in the system remains unchanged.
> so what if it’s a zero sum game?
While you may not initially be concerned about the distinction between positive-sum and zero-sum activities in society, studying history and economics may change your perspective. Positive-sum activities, such as entrepreneurship and innovation, contribute to economic growth and improved living standards, whereas zero-sum activities, like “buy low sell high” trading, do not.
> why should someone care?
Consider this analogy: if "buy low, sell high" trading is like playing chess, and your opponents are a collection of the best chess engines money can buy, operated by the world's top experts (think Magnus Carlsen), how profitable can you realistically expect your trading to be? The odds are heavily stacked against the retail trader. Some professional traders pay brokers to have retail orders routed to them for this reason much like how professional poker players want to play amateurs for their income.
While a small fraction of professional traders manage to beat the returns of buy-and-hold index investing, the fleeting existence of market-beating strategies is not a valid reason for the average investor to attempt them. Just as you cannot predict which lottery tickets will be winners, you cannot foresee which trading strategies will outperform. If this was possible highly paid professional traders that devote their life to it would be able to do it but only a few actually do and luck plays a big role in their success.
Markets have “seasons” and what seems to work in one season can be devastating in another. Markets also change in response to the trading strategies being used (aka “reflexivity”) and “paper testing” can give false confidence.
Right, so where do hedge funds fit in? They hire a lot of people and pay them very well; they sponsor tech events like this: https://www.man.com/pydata-london-59th-meetup. According to your rationale, they don't add any value to society?
And if you add the criteria that they should be a business - how do you think these active investors start? Do you think they just suddenly have $500m in funding and 50 people?
> how profitable can you realistically expect your trading to be? The odds are heavily stacked against the retail trader.
I'd expect it to be hard to become profitable, just like any other kind of business out there. You need to put in a lot of effort, a lot more than what people tend to expect; again, like with any other business.
> Markets have “seasons” and what seems to work in one season can be devastating in another. Markets also change in response to the trading strategies being used (aka “reflexivity”) and “paper testing” can give false confidence.
Sounds like a VC-funded startup to me :) You can make an amazing pitch deck, raise millions in funding, and burn it all to the ground when you realise there are no customers.
