An interesting story of market traders/secrets & facts of markets

An interesting story of market traders/secrets & facts of markets

Two peoples enter the market each one with 10,000 of capital. After 5 days of trading, the first one lost 8,000 and the second one gained 5,000.

We all know that, if the first will make a loss, only then the second one will gain profit. But here the first one lost 8,000 while the second one gained only 5,000. So where gone the rest 3,000? Yes, they both paid brokerage, taxes and other charges.

After ten days the first one recovered his loss by 2,000 and now his capital is 4,000 while the second one loosed his gain by 5,000 and now his capital is 10,000, which was his actual capital. So, again where gone 3,000? Again answer is the same, they both paid brokerage and other charges.

Till now we can see that 6,000 rupees have been swallowed as brokerage and taxes from both the characters of this fictitious story.

After 15 days of trading, the first one's capital is now 3,000 only and the second one's capital is now 5,000 only. Means they both have paid 12,000 Rupees as brokerage and taxes till now.

The story did not stop here and after 20 days of trading, both people's capital became almost zero.

If both made loss of their almost entire capital then it is a partial truth to say that, the one gain profit only when the other's one loss. As we can see in this story that both the characters have lost almost all their capital.

So, who is the winner in this market? The answer is very simple – Brokers, Government, Exchanges, Tips-Providers etc. Because they all are doing a well defined pure business in which there are very few chances of loss and their profit increases with the increase of their clients. And we are the clients of their business models being used as ingredients in their profit-making machines. We are being crushed like sugar-cane and they are enjoying the real juice.

Now come to another side of the coin. Is the market a place of gamblers? If yes, why the government not stopping this? Should we avoid participating in any type of market whether it is equity or commodity?

The answer to all the above questions is - ‘No’.

A market is a place for the buyers and the sellers. When a buyer and a seller agree upon a certain price, only then a transaction is done. The number of more buyers and more sellers helps in better price discovery. Very few buyers and sellers can't help in better price discovery in the market. We should not forget also that a market is a place for real buyer and seller who are not interested in making the profit by buying and selling the contract, they may be the real consumer of that commodity or willing to become a partner in the company in case of the equity market. 

Why I wrote this story? Well, there is no intention of demoralizing anyone and how can I say so while I too involved in that. The purpose of writing the story is only to reveal the fact that most of us are only wasting our time & money. Very few peoples really making money by trading in the market. 

If you have to say something, you are welcome to comment below, I will reply sure. If you feel this story interesting or have found anything informative, share this story with your friends and in your group. Thanks and Best of Luck to all the market participants.