I.12. Optimal trading model, conflict of interest.

Most people make money when they work for themselves and lose when they work for others” (Richard Wyckoff).

So, let’s show what the optimal trading model looks like:

Profit -> max.

Number of transactions -> min.

Yes, it’s that simple. It turns out that ideally, you should, for example, buy shares at the lowest price and eventually sell them at the maximum price, which will allow you to make only 2 transactions (minimum transaction costs) and get the maximum profit for this situation. The exchange will earn a minimum amount of money at your expense, i.e. the money will go into our pocket.

In practice, however, everything is not so obvious, because there is a conflict of interests of different market participants. The interests of market participants depend on many contradictory factors, which leads to noise in the market price movement. According to the above quote by R. Wyckoff, when you make a profit, you work for yourself, and when you lose money, you work for others (broker, stock exchange, market maker, other market participants). The ambiguity of the price movement during trading forces you to do the wrong actions, leading to losses.

The task of a trader is to be able to extract as much profit as possible in the time intervals allotted to them by using the knowledge, information and tools available to him.

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