Become a Successful Trader

May 6, 2011

What Value Do Traders Bring to Society?

As a trader, I’m sure you’ve been pressed with the question, what value do traders bring to society?

Over the years I have heard arguments for both sides ranging from “a trader provides liquidity, they transferring risk from farmers, to trading is a zero sum game and adds no value to the greater economy.”

Before I put together my post on what a trader brings to society, I thought I’d get some insight from you, a reader, and fellow trader.

What value do you think a trader adds to society, if any?


I hope to spark some lively discussion with this topic so leave your thoughts below, I look forward to reading everyone’s comments!

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About Tim Racette
Tim Racette is a day trader of 15+ years in the E-mini futures and swing trader of stocks. Mountain biker, lover of the outdoors, and explorer. Tim is an ASU Sun Devil and a Chicagoland Native now living in sunny Scottsdale, AZ.
  1. “Traders” bring the great entrepreneurial qualities of driven individuals to a daily showdown. Many, many will never survive their first year. Many more will remain net losers forever. “Trading’ merely brings about an opportunity for total self-reliance in the quest for financial freedom. It brings lessons of its own, that are only reflections of ourselves. Does it contribute to society as a ‘whole’? In minuscule monetary manners, sure. But overall, this is a solitary game. There is no ‘team’ there is nobody else to point the finger at when things go awry. Perhaps, the end result of trading could provide society with focused, solitary and professional individuals who ‘know’ what reality they choose to function in. Perhaps from time to time they may ‘let’ others into their reality, but mostly because they are bored or want to ‘give something’ back. These traders are the masters of manipulation and the kings of selling beliefs. What else REALLY matters? Not much, in my opinion.


  2. Traders help to accurately put a price on assets. Nothing more. Markets do not exist to fulfill our desire to gamble or to provide us an income because we want it. The only reson markets exist is to allow trade to happen-anotherange of one good for another. The more traders that exist in the marketplace, the more efficient this trading becomes, which reduces transaction costs for.both parties. Adding more participants decreases the likelyhood that mispricings will arise because these would be opportunities for traders to make moey.

    Let’s suppose for a second that in a small widget market with poor liquidity, multiple hedgers, but only.1 speculator, the 1 hedger doesn’t have to offer a fair price(monopoly). Similairly, if there are only 2 or 3 speculators, they may collude to control price. Under these conditions, gaps in price will be frequent, transaction costs will be high, and price may not be a good reflection of economic reality of the widget because price.was not competitavely discovered. A quick real world example: compare the bid/ask spread of USD/CZN vs. EUR/USD. The lower transaction costs of the EUR/USD are a direct result of the efficiency of that market compared to the USD/CZN.

    While trading may be a zero-sum activity, it is the collective efforts of all traders that provides a benefit to all of society as a whole, in the same way all the breadmakers competitively sell bread to benefit society as a whole by merely trying to provide for themselves in Adam Smith’s book: “The Wealth of Nations.”

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