FOREX is not a Zero Sum Game.

Discussion in 'Forex' started by mjl, Apr 19, 2009.

  1. mjl


    FOREX is not a Zero Sum Game. Trading is almost NEVER a Zero Sum Game

    In a Zero Sum Game no money leaves the game unless it is won by one of the players-- so there must be at least one winner. In FOREX , money leaves the game to the spread.

    This alone does not tell us weather a game like FOREX is beatable, but it is important to understand.

    If you and I bet one dollar each on the flip of a coin this is a Zero Sum Game. If I make you bet $2 to win only $1 this also is Zero Sum, however, you have a negative expectation as I am paying you too little when you win.. you must lose in the long run.

    Poker is a game of skill and in a game where no money is taken by the operator, or given to the dealers as tips, it would be a Zero Sum Game and the best player would have a positive expectation. In most casinos, the fee for playing, and tips to the dealer will not stop a strong player from winning.

    In horse race betting, even though there is some skill, it is incredibly hard to be a winner because too much money is taken by the track- often around 18%. The causes the odds on the horses to be much lower.

    Trading is almost NEVER a Zero Sum Game. One big question in each form of trading (or situation) is can a skilled trader have an advantage that is large enough, despite his costs which includes things like the spread and commissions.
  2. Actually Forex Day Trading is a minus sum game. Only seasoned pros who have mastered the art of speculation can consistently take money out of the market. For people who haven't finished their learning curve, to make money in forex is just an illusion.
  3. You're forgetting non-speculative volume, Forex Day Trading isn't an insulted game between winning and losing traders.
  4. Div_Arb


    You guys should invest your money in bearer bonds.
  5. What, for some paltry single digit return, I don't think so!
  6. The 18% take at the track...
    Versus the typical 0.01% fee for Forex trading...
    Makes for a perfect analogy.
  7. fxmonk


    Hi guys,

    I would like to offer a different perspective. I would argue that the forex market is a zero sum game because wealth is neither created nor destroyed. (As opposed to the stock market). Thus, although the transfer of money doesn't go to one individual, the sum of the money earned by all the winners comes from the sum of the money from all the losers.

    However, the point that you bring up that not all of the players are speculators (i.e. there are big companies who are buying and selling Euro because they have to fulfill an order for their product or hedge their business) is important. There is a lot less emotion involved in the market because of it.

    Thanks for bringing this up!

    Kris - thinking outside the box to spot and profit from fx trades
  8. forex isn't trading.. put a position on then go fishing for next four hours :D

    real traders trade futures INTRADAY :cool:

    forex is a joke
  9. It's fair to point out...
    That if you are not a long term winner...
    In pseudo-Zero Sum Games such as trading and poker...
    You have no business commenting on the fine points of such.

    The following is a must read for both Winners and Losers...
    The Winners will immediately recognize which "Trader Type" there are...
    (I'm a "Statistical Arbitrageur")...
    And the Losers should quickly evolve into a winning type...
    Or just stop gambling.
  10. Damn, that's where I've been going wrong, I'll get right on it!

    .....ah no it's ok, panic over, you said 'real' traders :D
    #10     Apr 23, 2009