“…winning traders can only profit to the extent that other traders are willing to lose. Traders are willing to lose when they obtain external benefits from trading. The most important external benefits are expected returns from holding risky securities that represent deferred consumption. Hedging and gambling provide other external benefits. Markets would not exist without utilitarian traders. Their trading losses fund the winning traders who make prices efficient and provide liquidity.”
Lawrence E. Harris (homepage)
Chair in Finance, University of Southern California
Download the PDF. This free report is about zero-sum trading, the single biggest reason trend followers win. In the long run, winners profit from trading because they have some consistent advantages allowing them to win slightly more often and, upon occasion, far larger profits than losers. Trend following provides those consistent advantages.