The Importance of Trading: Since transacting at the right price is critical, trading is central to value-investment success.

There is nothing inherent in a security or business that alone makes it an attractive investment.

Investment opportunity is a function of price, which is established in the marketplace.

• Whereas some investors are company- or concept-driven, anxious to invest in a particular industry, technology, or fad without special concern for price, a value investor is purposefully driven by price. 
• A value investor does not get up in the morning knowing his or her buy and sell orders for the day; these will be determined in the context of the prevailing prices and an ongoing assessment of underlying values. 

Since transacting at the right price is critical, trading is central to value-investment success. 

• This does not mean that trading in and of itself is important; trading for its own sake is at best a distraction and at worst a costly digression from an intelligent and disciplined investment program. 
• Investors must recognize that while over the long run investing is generally a positive sum activity, on a day-to-day basis most transactions have zero sum consequences. If a buyer receives a bargain, it is because the seller sold for too low a price. If a buyer overpays for a security, the beneficiary is the seller, who received a price greater than underlying business value. 

The best investment opportunities arise when other investors act unwisely thereby creating rewards for those who act intelligently. 

• When others are willing to overpay for a security, they allow value investors to sell at premium prices or sell short at overvalued levels. 
• When others panic and sell at prices far below underlying business value, they create buying opportunities for value investors. 
• When their actions are dictated by arbitrary rules or constraints, they will overlook outstanding opportunities or perhaps inadvertently create some for others. 

Trading is the process of taking advantage of such mispricings.