Why market exist?

Jim Dalton said: “Most people do not want to know the purpose of the market. They do not want to have to think rationally and objectively about the bigger picture. Most market participants, in fact most people in general, would rather be given a set of rules to blindly follow than to have to use personal insight and innovative thought. Again, the majority of the people who trade markets do not make money.

The purpose of the futures market is similar to any other market. It exists solely to facilitate trade, and it does so by auctioning from high to low and low to high, in order to find an area where trade can best be facilitated.”

So definitely, market do not exist for get rich quick schemes; rather it evolved over centuries for some definite socio-economic purpose- i.e., to move any tradable ‘asset or instrument’- tangible or intangible among two parties at a price agreeable to both at the time of trading. Market is simply a mechanism for two-way auction process aimed at the purpose of price discovery. Unlike daily goods we purchase from grocery store, value of such assets or instruments keep changing hence its trading price keeps changing. So, market do exist to transact the asset or instrument; & by doing so, it automatically discovers price of that asset or instrument!

Reason behind why many people lose money in trading is that, they seek gambling-like pleasure in assuming it as a ‘get rich quick’ scheme. Precisely for such losers, the market is set up in such a way to excite their emotions & hence market is a money sucker machine! Those losers tend to trade hearsays, assumptions & biases about the market direction; i.e., they trade feelings! Jim calls this market phenomenon as ‘price blindness’; & to avoid the perils of such kind of trading, all we need is an objective approach to trading markets. Here comes the importance of Value in trading; & Jim separates value from price, and trades value rather than price.

A very important distinction about value to be noted is that different people have different opinion of value depending upon their time horizons, i.e., amount of time they plan to hold the asset or instrument. Said so, it becomes very clear that, though for every buyer there is a seller in the market, not every buyer & seller are having same perception of the value & opportunity; i.e., why JD agrees with Peter Steidlmayer when he says that, ‘markets are not “efficient”, but they are “effective”. It simply means not every buyer or every seller is same; rather they have different motivations to act in the market, which leads to balance & imbalance (or excess) in the market forces.