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 trading , money leaves the game to the spread. This alone does not tell us weather a game like day trading stocks or 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. Sometimes the answer is yes! Sometimes No!?
Believe me in futures it is a zero sum game. For every dollar made there is another dollar lost period.
Your analysis is perfect apart from the inconvenient fact that when you lose money, that's negative dollars.
True... In the broader sense though, when the creation of money out of thin air is in effect, interest rates can be tampered w/, access to leverage = control of money supply... the world is not zero sum.
If there is a price spread, the game is not Zero Sum. By definition. ALL money bet is returned to the players. When there is a spread, a third, non-betting party, is taking money out of the game. Zero Sum Game has a precise definition.
Lol @ mathmos. When I go to a grocer's and buy an apple, is that a zero sum game too? After all, we both just exchanged something for its market price. When a married couple have sex that's also zero sum according to this logic - no money leaves or enters the game, after all. Clearly absurd.
Zero Sum Game is a term used in Game Theory and has an exact definition. It is used by mathematicians. It is used by Wall Street quants who work for large hedge funds. Go online and search for it and then you will understand what it means. When it comes to definitions, I find it best not to roll my own." Clearly you do not understand the term and eusdaiki does. Maybe in a few days I will post the definition, but you might find it fun to search your elf if you are the studious type.