Saturday, February 13, 2010

What traders do?

Three cheers for Nirav. He has asked a thoughtful, philosophical question.


if we say that trading is a business then like other business in which main objective of the business man is earn profit but at the same time he produce something which is needed by the people, but in trading only trader get the profit and no one else is benefited. So can we call it as a business?


My Notes: Nirav asked this question since he wants to become a trader but cannot understand if his profession will serve a social purpose.

Nirav, I have thought on this subject many times. My conclusion is:

The world is changing. Manufacturing and Agriculture is no longer the primary business in most countries. It is services. Some services provide a direct benefit to consumers. For example: The car mechanic repairs cars and therefore immediately serves the customer. Some services provide indirect benefits. Trading is such a service.

Tradng provides liquidity to financial markets. Without liquidity financial markets will not work. Without financial markets, most business activities will come to a stand still. If there were no traders, there will be no trading. Then, where will the capital and liquidty come from?  Now, most business activities have a good side and a bad side. Import-export is essential for the economy, but in another form it becomes smuggling. In the same way, trading can be distorted to actually harm the economy (we see this in the USA, and, in proprietory trading by some brokerages in Delhi) , but that means some traders are out of line. Trading serves a social purpose, like most other services.


Tushar said...

In addtion we give so many taxes besides brokerages on each of our trades, like
Service Tax
Education Cess
Higher Education Cess
Stamp Duty
Turnover Charges

on each and every trade.. this serves the social purpose

shabsaif said...

Last month a lot was written by you in your blog and others by in comment section about trading v/s business v/s full time work etc. If some one start other business like shops, manufacturing, supply of material etc, after initial hard work, the chances are more that business will grow up faster and in future need less hard work. But trading in financial market like daily you have to dig well and may be or may not be you get water from well.

Nitin Gupta said...

sir i had a query regarding the backtesting that needs to be done. what would be an appropriate time for which the systems need to be tested in order to increase its probability of being profitable going forward.And how much system drawdown is permissible and what could be a good net profit made on a system in an year consistently

Nirav said...

Thank you sir for clearing my doubts. Now I can concentrate on trading without any confusion.

Swingtrading said...

Dear Sir,

Apart from those benefits mentioned by you I would like to mention that the useful insights provided by you to traders and investors through your blog is also a social service.

Coming back to proprietory trading NSE is now extending and offering facilities for Co-location for smooth functioning of Algo Trading.
The link is :

mynac said...

Respected Sudarshanji,
You have very nicely described both sides of the topic. Beside this Nirav will have to always remember the following too, that if he is taking trading as a business then he,himself,alone is responsible for his success or failure. There will be no alternative, and so it is very tough.