Trader = speculator = gambler?

For long, I thought the traders are playing a zero-sum game and their only contribution is to provide liquidity to the market. Overall, they don't provide much value to our society and not surprisingly the general public view them as speculator and gambler too.

However, if we really study the market from the ancient world. At the very beginning, there is no currency. People exchange goods for goods. Of course, this is not convenient at all, since seller may have the goods, but couldn't find the buyer who want his goods AND also has the goods he wanted. The invention of currency creates an intermediary "common" goods that everyone needs.

Still, even with the currency, it is hard to find a buyer that needs the goods. Then it comes market that sets a fixed location for people to sell/buy stuff. Even with market, it is sometimes hard to find buyer/seller or enough buyer/seller for a certain goods. Then here it comes traders who don't need the goods themselves, but intent to act as intermediary to buy and sell to make a profit (catch the spread).

This trader's role needs to take risk on future prices and the risk of having to store the goods, along with the tied-up of capital. It also works on the price differences between markets at different location to balance the supply and demand between different regions or countries.

Overall, the trader's function is balance the supply and demand over "location" and "time", as well as providing more liquidity to facilitate the trades, and the competitions between traders also reduce the spread.

This function is quite important, but didn't get noticed for very long in China. Ancient China's noble class is not as clearly cut as western world, instead, Chinese Emperor has put people to 4 different classes: scholars, farmers, craftsmen and traders/businessmen. Scholars master the literature and knowledge of histories, it seems quite reasonable to put them to the top of the classes? But letting farmers sitting on the second class could be quite surprising to many other countries(even though it is just verbally so). This is because Emperors want to encourage farming and believes that is where the food and wealth comes from. Craftsmen also produce real goods, but that kind of goods are nice to have, but not have to have (like food). At last, the traders were considered as making profits from nowhere, since they didn't produce any real goods. These people were considered as making huge profits without actually doing the hard work. To discourage this kind of behavior, they were put to the bottom of the 4 classes.

Today, we have fully recognized the benefits of trades and think trades are equally important to our economy. However, the importance of trading in equity/derivative markets still haven't been fully recognized. In part, this is reasonable, the convenience of trading equity often makes people more short term oriented and more tempted on buying/selling for short term profit instead of long term investment. This fact is an unnecessary waste of resources and energies. Also, many people who want to profit from speculation ends up losing, a typical phenomenon of gambling.

Still, traders are not just speculators. Market makers and other liquidity traders make their profit primarily from providing liquidity to the market, not from speculation. And just because it is convenient and low cost to sell doesn't mean people should do so frequently with short term vision.