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When we participate in the stock market, we are either buying or selling a stock. There are two parties to the transaction. When we buy a stock, someone has sold it to us and when we sell a stock, someone has bought it from us. The National Stock Exchange of India (NSE) just provides us with a platform to execute the transaction.
The market structure ensures that we don’t know who we’ve bought from, or sold to. In other words, we don’t know who is on the other side of the transaction. Both the parties to any trade cannot win, one of them has to lose. Hence, in competitive terms, we have to beat the person who is on the other side of the trade. That is another way of saying that in the stock market, we are betting against the person on the other side of trade.
Think of all the participants in the stock market game arena as a giant pool of participants. If you are the only smart person in this pool, and the rest of the participants are idiots, you would win on every trade. It follows that as the number of smarties in the pool increases, the more difficult it is to consistently win.
Over the last decade, the smarties in this pool of participants have been consistently increasing and this was true till the advent of the pandemic induced lockdowns. One of the unintended consequences of the lockdowns has been that participants in the pool have shot up and after a gap of almost a decade, the smarties are in the minority. In money terms, as the flow of ill informed money keeps growing, the odds are once again in favour of the smarties.
Hence, the phrase, ‘winning the losers game’; the outcome of the Stock Market game is decided by the activities of the loser. So, the lesser the number of unforced errors we make, the higher the probability that we end up with the winners. To win, in this scenario, one has to wait for the person on the other side of the trade to make a mistake, since that is the person we are betting against. In other words, we need to be patient and ready to pounce upon opportunities that the market presents on an almost ongoing basis.
When we participate in the stock market, we are either buying or selling a stock. There are two parties to the transaction. When we buy a stock, someone has sold it to us and when we sell a stock, someone has bought it from us. The National Stock Exchange of India (NSE) just provides us with a platform to execute the transaction.
The market structure ensures that we don’t know who we’ve bought from, or sold to. In other words, we don’t know who is on the other side of the transaction. Both the parties to any trade cannot win, one of them has to lose. Hence, in competitive terms, we have to beat the person who is on the other side of the trade. That is another way of saying that in the stock market, we are betting against the person on the other side of trade.
Think of all the participants in the stock market game arena as a giant pool of participants. If you are the only smart person in this pool, and the rest of the participants are idiots, you would win on every trade. It follows that as the number of smarties in the pool increases, the more difficult it is to consistently win.
Over the last decade, the smarties in this pool of participants have been consistently increasing and this was true till the advent of the pandemic induced lockdowns. One of the unintended consequences of the lockdowns has been that participants in the pool have shot up and after a gap of almost a decade, the smarties are in the minority. In money terms, as the flow of ill informed money keeps growing, the odds are once again in favour of the smarties.
Hence, the phrase, ‘winning the losers game’; the outcome of the Stock Market game is decided by the activities of the loser. So, the lesser the number of unforced errors we make, the higher the probability that we end up with the winners. To win, in this scenario, one has to wait for the person on the other side of the trade to make a mistake, since that is the person we are betting against. In other words, we need to be patient and ready to pounce upon opportunities that the market presents on an almost ongoing basis.