Thread: Is Forex a ZERO Sum game?

Only my view....Defining a certain market as a zero sum one means that at any time period, there's always losers and winners. . .Winners who realize real profits and losers who realize real losses....The futures the currency markets are like that. . .Regardless of those commissions as well as the spreads and everything else connected with the costs, finally, some traders make profits and others create losses. . .This is a zero sum in my view, as generally, traders losses generally nourish the commissions, spreads other traders profits at any time period...

From the stock market, it is a different case a tiny bit...I think that the stock market is a zero sum market, over the very long run. . .But normally it isn't in the short term. . .And once we state the short term, we're talking about 3-5 years. . .If people are long stocks stocks are being bid up, finally everyone is winning and nobody is losing, excpet people who are short. . .However, shorts may maintain their losing positions longer than they can hold places in the Currency Market and the futures markets because leverage is a lot lower....

Over the very long run, the stock market is a zero sum game, in which the losers pay the commissions of the brokers the profits of other traders and investors if they buy stocks out of them only at the top of the hill...


Thanks,

Nader

Originally Posted by ;

Only my view....Defining a specific market as a zero amount one means that at any time period, there's always winners and losers. . .Winners who realize real profits and winners that realize real losses....The futures the currency markets are like that. . .Regardless of those commissions as well as the spreads and everything else connected with the costs, finally, some traders make profits and others create losses. . .This is a zero amount in my view, as generally, traders losses generally feed the commissions, spreads other traders profits at any time period... From the stock market, it's not the same situation a tiny bit...I believe that the stock market is a zero amount market, within the very long run. . .But normally it isn't in the brief term. . .And once we say the brief term, we're speaking about 3-5 decades. . .If people are long stocks , and stocks are being bid up, finally everyone is winning and nobody is losing, excpet those that are short. . .However, shorts may maintain their losing positions more than they can hold places in the Foreign Exchange and the futures markets since leverage is much lower.... Over the very long run, even the stock market is a zero sum game, where the losers pay the commissions of the brokers the profits of other traders and investors when they buy stocks out of them just on top of the hill... Thanks, Nader

I definitely respect your view on this, but I always believed that zero amount meant

net losses internet gains = 0

In almost any market with a commission or spread, I didn't believe it was possible since the broker is going to take a reduction of losses and gains.

In a totally zero-sum market, if I buy the EURUSD in 1.2000 my buddy should be able to SHORT the EURUSD in 1.2000, then as the market goes up and down my losses or gains = his losses or gains. But, we all know that with a spread, this is impossible. . .If I wish to BUY the EURUSD from a broker at 1.2000, a trader at the moment is SELLING (or shorting) to the broker in a lower price (let's say 1.1997). . .that means that now, I'm currently in a 3 pip loss (identical with the guy on the brief end. . .he's in a 3 pip loss as well). As the market goes up 1 pip, my internet loss is two pips while the shorter is in net loss of 4 pips. As the market goes up 10 pips, I've an unrealized profit of just 7 pips since the moment I try to sell, I will need to return 3 pips to the spread. But on the brief side, the second the shorter wants to buy back his loss, his realized loss is 13 pips.

7 (-13) = -6 which shows that the Foreign Exchange is a NEGATIVE sum game.

Zero amount, from the raw sense of the definition, means if I earn 1, someone else lost $1.

Why a zero sum game can turn into a negative sum game is because of commissions as well as the spread (the broker and market maker are earning a living from your trades). So unless you are one of them, you are playing a negative sum game by trading commodities (and currency is a commodity). The game is not negative by much, I think its safe to call it a zero sum game.

The stock market is positive sum game as a stock can go up in value and all us stockholders are earning money. The inherent, ie the stock, is really expanding.

So, if a bushel of hay can become two bussells of hay by keeping it for two months, that would also be a positive sum game

Zero amount.


IF you win 10pips, then it means someone else lose 10 pips. In this case, due to the spread, you actually win 7 pips, on the flip side, a person out there lose 13 pips. Loser are more than Winners.

Originally Posted by ;

zero sum.


IF you win 10pips, then it means someone else lose 10 pips. In this case, due to the spread, you truly win 7 pips, on the flip side, a person out there lose 13 pips. Consequently, Loser are greater than Id.

Case in point. . .that makes it sum game.

Merlin. . .stock market a positive sum game? Your example has merit. . .but do not be deceived. . .there are shares which DEVALUE which make it longer than a negative sum game. I guess the inventory could be worth cash. . .but I was always in the camp a stocks price was ordered mainly by what someone else was willing to pay for it. But, I really do see your point.

Forex is not even a game because there's no contract involving 2 players involved. Like such as in poker - if I win (I have highest rated hand) I will take your $10, if you win (you have highest rated hand) you'll take my $10.

No such agreement exists in Forex.

Originally Posted by ;

Forex isn't a game because there is no contract involving two players involved. Like for example in poker - if I win (I have highest rated hand) I will take your $10, if you win (you've got highest rated hand) you will take my $10.

No such arrangement exists in Forex.

Thats what i thought. Im sure im wrong but I was under the impression it worked rather like this:

In stocks you've just a certain number of stocks outside, and basically in order to exchange you you want to buy and/or sell shares from somebody else. However, in forex, I thought it was a market 'rate', and there there wasnt a 'float' for the currency circulating in each country. . And that the spread was the broker profiting, not really two sides buying/selling... that would indie that there might be many more winners than losers at some points and more losers than winners at others. It might be a zero-sum game, but more than time?

Than again this is my first post and ive just been actively analyzing forex for a couple weeks (this forum is great thanks guys ).

Originally Posted by ;

Thats what i thought. Im sure im wrong but I was under the impression it worked rather similar to this:

In stocks you've just a certain number of shares out, and basically in order to exchange you you want to buy and/or sell shares from someone else. However, in forex, I thought it was an exchange 'rate', and there there wasnt a 'float' for the currency circulating in each country. . And that the spread was that the broker profiting, not really two sides buying/selling... which would indie that there could be more winners than losers in some points and much more losers than winners in others. It might be a zero-sum match, but more than time?

Than again this is my very first article and ive just been actively analyzing forex for a couple weeks (this forum is fantastic thanks guys ).

Wow. . .great point. . .but I really do have to wonder. . .technically, I AM purchasing 100,000 Euros at a given rate. . .however, you are right about the float area. . .there is no exchange of merchandise. Then again, the rate is a manifestation of this desire for someone to sell 100,000 Euros at the rate. If no one wanted to sell the Euro, then the rate would go to positive infiniti. So, perhaps there is some sort of implicit contract. . .with the general market, I guess.

Good point, however...

Well, you appear to count out the spreads and commissions from the formula, but I feel this shouldn't be accomplished. . .The fact is the amount of money Within the market is steady, spreads and commissions are paid from this amount of money, so you can't count them out and state that the whole game is a negative amount...


Thanks,

Nader

There's money forgerry, computer malfunction, few digit around up
occasionally somebody burn off their money, melt it for the nickle/silver/gold.
the bank print new money , bla bla bla,