馃攳
What is a Zero Sum Game | Game Theory | The Money Master - YouTube
Channel: unknown
[0]
many are called but a few are chosen
[3]
ever heard this proverb
[4]
this certainly holds true for trading
[7]
there's a famous saying that
[9]
90 percent of traders lose 90 percent of
[12]
their money in 90 days yes don't be
[15]
surprised the statistics shows that 90
[18]
percent of people who start trading lose
[21]
90 percent of their capital in less than
[23]
three months and in this video we are
[26]
going to see why trading is a negative
[29]
sum game i know this video is going to
[31]
receive a lot of hate but we're anyway
[33]
going to do it so let's get started
[39]
[Music]
[40]
let us first understand what is a
[43]
negative sum game
[44]
in the game theory there are three
[46]
mathematical representations of any
[48]
situation
[49]
first
[50]
zero sum game second
[53]
positive sum game and third negative sum
[56]
game
[57]
let's try and understand each one of
[59]
them
[60]
zero sum games are the games where for
[63]
one person to win another person has to
[65]
lose for example suppose there is a
[68]
group of friends cutting a birthday cake
[70]
and the host takes the big piece from
[73]
that game now this automatically reduces
[76]
the amount of cake available for others
[79]
as well as it increases the amount of
[82]
cake available for the taker that is the
[84]
host now why am i referring to the host
[87]
you'll get to know by the end of this
[89]
video so do watch this video till the
[91]
end okay now coming to the second type
[93]
the positive sum games positive sum
[96]
games are those where the sum of the
[99]
winnings and losses is greater than zero
[102]
this becomes possible only when the size
[105]
of the pie is somehow enlarged and there
[108]
is more wealth to distribute between the
[110]
parties than there was originally or
[113]
some other way has been devised so that
[116]
everybody gets what they want and need a
[118]
good example of this would be patient
[120]
investing so let's take an example of mr
[123]
x and mr y
[125]
mr x bought the shares of reliance
[128]
company when it was trading around at
[130]
rupees hundred
[132]
after holding the shares for a couple of
[134]
years mr x finally decides to sell those
[137]
shares when the price of the stock was
[139]
trading at rs 900 that is 9x returns for
[143]
mr x now comes the another party mr y mr
[146]
y bought these shares from mr x at
[149]
rupees 900.
[151]
now after holding the shares for a
[153]
couple of years mr y now finally decides
[156]
to sell the shares of reliance when the
[158]
price of the share was at rupees 2000.
[161]
and in this outcome both mr x and mr y
[164]
have earned profit and this is where the
[167]
positive sum game occurs where no one
[170]
wins at someone else's expense the third
[173]
and the most difficult one is negative
[175]
some games where the pie is shrinking in
[179]
the end
[180]
all the gains in the losses will add up
[183]
to be less than zero
[185]
this means that for any party to
[187]
maintain its position
[189]
they have to take something from another
[191]
person now even if even if everybody is
[195]
ready to take his or her share of losses
[198]
everyone will still lose in comparison
[201]
to what they had initially or they
[204]
really wanted initially a recent example
[206]
of this would be unfortunate people who
[209]
invested their hard earned money in a
[211]
few of the schemes of franklin template
[213]
and mutual fund now in the last part of
[215]
this video we are going to understand
[218]
why trading is not a zero-sum game or
[220]
why it may be a negative sum game
[223]
so by now you must have understood the
[225]
definition or the meaning of zero sum
[227]
game in zero sum game the profits and
[230]
losses of all the players come about to
[232]
be zero
[234]
winners profits are the losers losses
[237]
simple right several important
[239]
implications flow from this
[241]
understanding whether trading is or is
[244]
not a zero-sum game so do listen to this
[247]
part very very carefully and take notes
[250]
if you want to let me explain this to
[252]
you with the help of an example of the
[254]
game poker because poker is a good
[257]
metaphor for trading now we are going to
[259]
consider two scenarios scenario number
[261]
one you are playing poker with your
[263]
friends at your friend's place
[265]
this situation is a zero-sum game
[268]
whatever player wins some other has to
[270]
lose but the winnings and the losses of
[273]
all the players will add up to be zero
[276]
like i mentioned earlier now consider
[278]
the second scenario where you're playing
[281]
poker at the club
[282]
this will be a negative sum game in this
[285]
situation the house charges some
[287]
percentage of the profit or a fixed fee
[290]
per hand
[291]
this will become a negative sum game
[294]
because the winnings and the losses of
[296]
all the players will add up to be less
[299]
than zero the players in aggregate lose
[302]
to the house
[303]
similarly in trading no trader can
[306]
profit without another trader losing
[309]
the game isn't equally balanced my
[311]
friend why you will know now for
[314]
simplicity let's suppose the stock
[316]
market has only two traders ram and
[319]
shine at the beginning of the day they
[321]
both have rupees 10 000 each so their
[324]
balance sheet will look something like
[326]
this rams capital 10 000
[329]
shan's capital 10 000.
[332]
during the day they both indulge in
[334]
intraday trading and ram loses 10 000 to
[338]
sham
[338]
[Music]
[339]
now at the end of the day their revised
[342]
balance sheet would be
[343]
rams capital 0 and sharm's capital 20
[348]
000. that's simple right but that
[350]
doesn't happen to be the case you ask me
[352]
why because in order to carry out these
[355]
transactions successfully they have to
[358]
pay these charges
[359]
now what does this mean
[361]
this money has been taken out of the
[364]
system you can see in this uh your
[367]
2017-18 report from business standard
[370]
that the government collected
[372]
111 billion rupees from the stock market
[375]
for the financial year
[377]
2016-17 that's insane right now where is
[381]
this money coming from it is being taken
[383]
out of the pockets of both the winning
[385]
as well as the losing party irrespective
[388]
of whether you win or you lose the
[390]
government in the exchange will
[392]
definitely be benefiting from your
[394]
transaction and this is why trading more
[397]
specifically intraday trading and
[399]
derivative trading is a negative sum
[402]
game whoa it took a lot of effort to
[404]
research and write the script of this
[407]
video so if you like the effort
[409]
and you want to support us
[411]
guess what you can do it for free
[414]
just like the video share it with your
[416]
friends put this as your whatsapp status
[419]
just do your thing this way you're
[422]
telling the youtube algorithm that this
[424]
video this video is what sharing this
[427]
channel is worth growing so do us this
[429]
favor and do this only if you really
[431]
really liked our content and you want us
[433]
to be coming up with videos on regular
[435]
basis
[437]
until next time namaste bye bye and take
[439]
care
[441]
[Music]
[450]
you
Most Recent Videos:
You can go back to the homepage right here: Homepage