Saturday, July 12, 2008

Why short term share trading is a losing game

Buying shares is supposed to be an investment into the potential growth of a company in its ability to make even more money. Nowadays people trade in shares hoping for a short term increase in the share prices. When everyone starts to do that, it makes mockery of the word "investment" and it makes a fool of the players because ultimately the winners are the brokers and the fund managers.

Why is it a losing game? Let's assume there is a fix amount of money on the table. The players buy and sell frequently among themselves..... somebody loses, somebody wins. This goes on and on. The broker skims off a percentage for each trade. Ultimately the amount of money on the table gets smaller and smaller. Who do you think is the eventual winner?

No comments: