...winning traders can only profit to the extent that other traders are willing to lose. Traders are willing to lose when they obtain external benefits from trading. The most important external benefits are expected returns from holding risky securities that represent deferred consumption. Hedging and gambling provide other external benefits. Markets would not exist without utilitarian traders. Their trading losses fund the winning traders who make prices efficient and provide liquidity.
Lawrence E. Harris (homepage)
Chair in Finance, University of Southern California

Download the Adobe .pdf report. This free report is about zero-sum trading, the single biggest reason Trend Followers win. In the long run, winners profit from trading because they have some consistent advantages allowing them to win slightly more often and, upon occasion, far larger profits than losers. Trend Following provides those consistent advantages.

Larry Harris' New Book Trading and Exchanges.

Feedback

Shockingly informative! I was relieved to discover I'm not a gambler. I do however, exhibit behaviors of the Inefficient and Pseudo informed trader. Really quite amazing, I've been trading off and on for twenty years, with minor changes here and there repeatedly doing the same things always expecting a different outcome. You could argue that's a pretty good definition of insanity. I highly recommend everyone print Mr. Harris' info and read it several times. You need to know what you are in order to begin the process of change.
Sincerely, Phil B.

Greetings TurtleTrader -- I just started back at my Master's of Applied Economics program and I have a few finance classes. I really enjoy listening to my Ph.D. Professors blither on about a company's value and what it's stock price must be worth! I just want to scream, Who cares?. But, I just sit back and remember that their analysis is the reason that I will be taking their money some day.
Thanks for the great site! Larry S.