Thread: Is Forex a ZERO Sum game?

I have participated in this discussion of commodities being a zero sum game for a number of years and have always contended it is not such. It is zero sum if you add in the consumers but it is not without them. Imagine there are three people on the planet. A consumer, a producer and a distributor. The producer generates the commodity for a price of $1 and sells it, through a commodity contract that is ultimately delivered. The producer sells for $2 and produces $1. Over a period of time the price of the commodity rises to $3. The supplier sells his delivered commodity to the consumer for $3, making a profit of $1. Over the duration of the trades the producer makes $1, the seller earns $1. The consumer pays a higher price and may be considered the loser to balance the scales of a zero sum game. However, the participants in the commodity transaction both made cash. Not a zero sum game.

I think that it's very tough to consider FX concerning game theory with all of its sophistiion.
One should notice, that such as not every player follow the same rules.
By way of example, banks may create non- speclulative transactions and we can't state that they won or lost.

And speaking about just retail investors, they constitute approximately 20 percent of the entire FX spot market
(https://www.ecb.europa.eu/paym/group...bebe1c60d92ce4)
Therefore it is likely that all of them win or loose simultanously.

Supply Vs. Demand. I don't understand why not...

Originally Posted by ;

I ve a question concerning the triumph lose game in Currency Market. Is Currency Market a zero sum game? I.e. is the winning of some trader in one portion of the world drives the presence of a losing trader some where else? In other words, hypothetically speaking, can all traders win in a given time? Or this is hopeless?

This is not a zero sum game and about the issue of can traders win in precisely the same time, nope. .

Technically Forex is not even a zero-sum game, it's actually a negative-sum game on account of the cost of gambling, aka spread, commissions.

The announcement in the quote appears correct to me most Forex transactions aren't made for speculation. Just remember you'll be fighting with the institutional traders to get that piece of profit.

Most retail traders will always be losers anyway, so the entire thing is somewhat theoretical.

Yes, it's a negative sum game. For the traders. For those that are brokers? Who knows. There would have to be more profit in it for them to keep it running.

Spreads and commissions are a cost of doing business and should be segregated in the value of the 'trade'. Saying Forex is zero-sum is much to broad a statement as Forex isn't the game. The 'game' is the 'trade', and every trade is a new unique game inside itself. This is what's totally zero-sum, the trade. What you lose/make, the other player(s) make/lose respectively, really straightforward. Nothing is created or destroyed in the process. It's just. What you pay in spread or commission is by a 'separate' pool of money, the fact that it's taken from the account and bundled up on your stats/figures as an effect of a trade is irrelevant. Should you win, you pay for it as an addition however, your profits occur to pay for it instead of debiting your account farther. Should you lose, it's also deducted from your account, in addition to the value of your loss, it's mended either way, but no currency was created or destroyed in the process. There is not any space for 'twisting' facts surrounding the game to make it anything other than zero amount. The trade has a value from begin to finish, and it's always cancelled out, returned to zero, albeit at the end of the game, redistributed amongst the players.

DD

Well generally, in order for one to make money in Forex, another has to lose. After all this is the way the trading positions are closed, otherwise they could stay open eternally. Yet, we seem to overlook the component of inflation and also the stage where the transaction was started. For instance when I opened my position yesterday and decide to close it today in a profit, a different person may be willing to start a similar position with view to closing it the following day or following a day or two. Thus, both have the potential to make profits. SO in this sense, we cannot state that Forex Trading is indeed a Zero-sum game.

It's a game.

The problem is it's really a zero sum game

Eg 1: At the hands of unethical brokers. For example you tripled account after much hard work trading, and he comes along and voids (confises) your profits on the grounds of arbitrage or benefiting from lagging prices or account overly active etc (one of the many excuses I found in forums). It means that he transferred your profits to himself.

Eg 2 : Price moves based on liquidity. And it's really true for every winner there needs to be a loser be it a individual, institution etc.. This is the way tick prices upgrades - there needs become a buyer for each seller for it to work.

Eg 3: Depending on the way u see it, Foreign Exchange is actually a LOSING match for most retail traders. Lets see, some brokers will charge u etc prices. Along with commission and spreads. And un confront glitches, black swan event (like SNB), slippage, requotes etc that might cause losses even if u have sound egy. Or worst case broker goes belly up like alpari uk and u now have to wait years for the $$$ individuals with smaller amounts will be covered by FSCS but bigger amounts might have to bear losses