Hey Guys,
I was wondering if you guys can help a bit. If you had to define the trading business, what would you say it is? Here is the challenge, when you write your definitions, you can not use the word Trade/Trading or the word Market.
Thank you for your help on this. I am doing it for a very specific reason which I will share once I get enough input from you guys.
Thank you,
Matt Z
Optimus Futures
@Mod-MattZ, this sounds like a fun project!
I’m trying to come up with some stuff and wondering if you can give a quick example?
To describe the market I’d something like:
An instrument that allows entities and individuals to buy and sell an underlying asset.
I think this is a definition of the marketplace more than the trading business.
If someone made me come with a definition of the trading business, I would approach it like this:
Thanks,
Matt Zimberg
Optimus Futures
Buying and selling financial instruments with the goal of having the sum of profits be greater than the sum of losses and expenses.
Edit: I thought about it a little more and think the first definition that I wrote doesn’t encapsulate the probabilistic nature of the business enough so I’m changing it to this:
Buying and selling financial instruments with a quantifiable edge to increase the probability of having the sum of profits be greater than the sum of losses and expenses over a series of trades.
Excellent!
Matt Z
Optimus Futures
The first part of my job is to predict the future price of an asset. [Analysis]
The second part of my job is to identify where and when I should buy or sell the asset so being wrong results in a small loss vs a large profit when I am right. [Execution]
The third part of my job is to manage risk, to ensure I can overcome probability and random events. [Risk Management]
The fourth part of my job is psychology, to be able to deal with the pressures of working in a probability based environment, dealing with large sums of money, and understanding and managing natural human characteristics such as bias, ego and other emotions which interfere with the correct process. [Psychology]
Actually, that list is backwards!
Thanks @autobahn
Indeed everything you described is involved in trading.
But, what you want is to come up with a shorter definition because once you have it defined, it can serve as a foundation for your overall philosophy of trading.
I will also add my definition of trading or investing once we get a few more comments, but just as an FYI, my definition does not even involve the words buying or selling. Buy/Sell are actions that are a result of your decision-making, so they are secondary.
I do agree with you on the “backward” because, in my personal opinion, it is not your market predictions powers that would yield positive results; it’s the management and the psychological discipline that could help you spot your edge.
Matt Z
Optimus Futures
Difficult one. I will have a think.
Trading Business
The process of redistribution of wealth from the over leveraged, under capitalized, over speculative, often low skilled individuals with unrealistic and excessive return seeking expectations to the more knowledgeable, better capitalized and systematic.
My first draft also included unlucky but in reality with good risk management and leverage being unlucky is just a speed bump.
Nice! That is quite a new angle from a definition standpoint! 
Matt Z
Optimus Futures
Short term investing
Attempt 2:
I’m looking for short term market inefficiencies caused by many other market participants being forced to trade when time is more important than price.
(Explanation): Why might another trader may be forced to trade?
When I set to define trading activity as a definition, I wanted to achieve several goals:
I wanted to avoid trading related terms because most think of trading only in terms of dollars and get caught in psychological traps, whether through FOMO, fear, and greed. Therefore we must take action and goals to counter that type of symptoms.
Also, I wanted to address that you MUST use a method. This means, no “gut-feel” based actions.
Here is what I came up with:
A Decision-Making Activity where you must choose Reality-based actions rooted in a Logical Method where reward must outweigh risks for a positive overall outcome.
Matt Z
Optimus Futures
I started back in 2009 and had a problem of making money but not feeling I earned it. The before caused an issue and I lost what I made. I had to step back and think why am I being rewarded.
We don’t make anything or provide a service, I thought. But actually we provide (no matter how small) liquidity to the market which in the end, results in a more fair price for all market participants. Providing liquidity is a crucial job (even if small) as without it, the market would be off balance and result in unfair prices.
Once I realized that we do provide a service (liquidity) I lost the conflict of consciousness.
I would define the business as one in which we provide liquidity which results in a more fair price for the next buyer or seller. My job is to trade as many contracts as possible and as frequently as I’m comfortable with, to help with the provision of a fair price. My ability to trade more contracts is dependent on the amount my account grows. Thus, the more successful I am, the more I can contribute to making a fair price. Albeit, maybe in a small way but, like voting - we all contribute to elect one.
I do hope hope this is not a logical fallacy; as I believe it to be true. But truly and always open to other opinions.
A Decision-Making Activity where you must choose Reality-based actions rooted in a Logical Method where reward must outweigh risks for a positive overall outcome.
Forgot to put in my one line.
The business is based on liquidity where each participant enters on their beliefs, the business is without prejudice and the more profitable one is, the more likely the participant is to provide additional liquidity which enhances the business.
Without liquidity the business ceases to function.