But yes, no one is looking for GTO in trading. The game is not well-defined. There are thousands of participants each with totally different objectives and win conditions. That makes it not zero sum in the first place. Pension funds, banks, HFT firms can all make money while trading with each other.
In a very simple form, if you're a fisherman you may have a surplus of fish, much more than you can eat before they go bad. Fish is not worth much to you, but maybe you need cloth for sails, the someone in the village collects and mends and sews cloth. They have a lot, but need food. Trading fish for cloth benefits you both.
Money is just an abstraction to smooth trades between people for resources they need. Scale to whatever level you want.
> Everything is worth what its purchaser will pay for it.
- The Moral Sayings of Publius Syrus, maxim 847.
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[0]: https://en.wikipedia.org/wiki/Fractional-reserve_banking#Mon...
Forget about stocks - this is the whole point of trade in general. People have different resources and different needs, time horizons, risk tolerance etc., so the default assumption should be that voluntary trade is positive sum - just like Ford selling a car is positive sum even though there is a buyer and a seller.
Later, Apple goes up to $300/share. Bob sells his stock to Charlie. Bob is now $100 richer, Charlie is $300 poorer. Total change: zero.
Apple is more valuable and that (probably) means wealth was created, but that increase in wealth comes from Apple doing things, not from the trading.
Non-stock trading creates wealth because different people value things differently. A sandwich is worth less to Subway than it is to me, so total wealth increases when I pay them for a sandwich. But stocks don't really work that way. Unless you're buying a stock to exert control over the company, the only thing you're doing with it is using it to make money money. If you're making money by selling at a higher price later, then that comes from someone else paying that higher price, and it's all zero-sum.
I was responding to "Pension funds, banks, HFT firms can all make money while trading with each other." I readily accept that economic activity is not zero-sum, creates wealth, and that trading stocks can help enable that. But just trading by itself doesn't make money.
You mention two factors that can introduce new capital into the system, new investors and dividends, but seem to imply they are negligible or can be ignored... on the contrary those two factors are quite significant contributors and according to some theories dividends are the ultimate and total source of value in the stock market:
I didn't mean to imply that those two factors are negligible. Only that they're not part of "trading," i.e. trading is zero-sum but these make the system as a whole not zero-sum. I was responding to "Pension funds, banks, HFT firms can all make money while trading with each other." Which suggests that you don't need other things for everyone to make money, it can happen purely by trading.
To give it another context: imagine a seasoned chess player playing with a novice who just studied an opening. Once the more experienced player realize that his opponent is playing "sicilian" he knows his opponent game plan, next five moves and can set traps accordingly.
However your main point, that GTO can not be exploited, is correct.
I would say markets are approx. zero-sum on small time-scales. And low-beta alpha is better sourced from treating the market as zero-sum. Short-term price movements are primarily driven by the redistribution of wealth between market participants rather than by the creation of new fundamental value, making strategic positioning against other traders more effective for generating uncorrelated returns.
This page has more details: https://blogs.cornell.edu/info2040/2021/11/03/game-theory-op...
