Trading is zero-sum game – part 2

If you haven’t read the first part, do read it first here.

In this part, I will give an example to show why it’s not logical for anyone to share their profitable strategy. For now, let’s assume there is no trading fee at all.

First, let’s have a scenario where everyone use their own strategies.

A buy 1 SHITTYCOIN at 10 USDT.
A sell it to B at 12 USDT. Now A has 2 USDT profit.
B sell it to C at 14 USDT. Now A and B has 2 USDT profit each.
Now the price drop to 10 USDT. C sell it to A for 10 USDT. A and B has 2 USDT profit each, C has -4 USDT loss.

Now this is what might happen if A share their strategy to B.

A and B each buy 1 SHITTYCOIN at 10 USDT.
Now both of them want to sell it at 12 USDT. Since there is only 1 buyer (C), that means whoever put their sell order first to the exchange would be the winner.
Let’s assume A put the order first. That means now A has 2 USDT profit. B and C each hold 1 SHITTYCOIN.
Now the price drop to 10 USDT. C sell it to A for 10 USDT. A has 2 USDT profit, C has -2 USDT loss, and B has no profit/loss yet.

Let’s put a new aspect to new scenario : slippage.

A and B both put buy order for 1 SHITTYCOIN at 10 USDT. Since B is the one putting the order first at the exchange and the volume isn’t much, only B’s order get filled.
B then sell it at 12 USDT to C. B get 2 USDT profit.
Now C has an open trade, waiting for the price to go up. A has open buy order, waiting for the price to drop.

Now let’s imagine alternative scenario. Now B knows that A would enter at 10 USDT. B also know A’s exit logic and/or stop loss. B is a whale with plenty of money. If B wants to screw A over, this is one way (out of many other ways) to do it

A buy 1 SHITTYCOIN at 10 USDT.
Now B will short SHITTYCOIN to make the price drop to the stop loss level of A, let’s say 8 USDT.
B also has put buy order at 8 USDT, because they know A will sell at that level.
Price drops to 8 USDT, A put sell order, exchange will match it to B’s buy order. Now A has -2 USDT loss.

Now let’s see another scenario when A also share the strategy to C.

A, B and C each buy 1 SHITTYCOIN at 10 USDT.
All three put sell orders at 12 USDT. Since now there is no buyer at that price (all potential buyers has now becomes seller), they can’t exit the trade. They have to wait for someone else to put a buy order. Even then, it will be the race of who put the sell order first to the exchange.

As you can see, there is no real benefit of A sharing their profitable strategy. That’s assuming A has a real profitable strategy and they really using it. Now, there are 2 possible reason why A will want to share their strategy

1. Their strategy sucks and really can’t make money. It’s easier to just sell the strategy to random people and get fixed amount of money from it.
2. That strategy isn’t their real strategy, but a strategy made to be their real strategy’s liquidity provider. As shown in the last scenario, for a trade to be made, you need to have buyer and seller. If you can make sure you always have counter orders available, it’s better.