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  • #641
  • Sep 26, 2010 12:14am Sep 26, 2010 12:14am
ladies and gentlemen its fine to disagree but please have your discussion without name calling, think I'll stay out of this one

But it sounds like you're all right just through different interpretations of what you're actually talking about - that being ZERO SUM

IMO - To Sell you need a buyer or vice versa. Trading at its heart, IS zero sum because you cant have a seller in a market until someone has bought. You cant have a loser without a winner, weather that be your broker or another trader.

But as the other posters like Trade runner and Chikcy pointed out its not quite that simple cause there are other factors involved
Time hides Nothing
  • #642
  • Sep 26, 2010 12:21am Sep 26, 2010 12:21am
sorry dude, but that guy seems to do his fair share of hallucinogens. and when he gets words and ideas completely twisted and makes up stories, it calls for a smacking.
  • #643
  • Edited 1:48pm Sep 26, 2010 5:09am | Edited 1:48pm
Quoting Czech
What you and your esteemed quotee fail to realize is that "negative sum" (or zero sum for that matter) does not imply a distribution of outcomes. It only says that the sum of winners and losers will be negative (or zero). Two traders trading with each other may both win, so what? As a result, two other traders were both losers, the sum of all positions was negative.

edit: whose definition was a coin toss?
While the concept indeed doesn't imply so, it's interesting how the latter affects the former's usefulness as a concept.


I'd imagine zero sum came from the days when market makers directly matched one trader's position to another's or a few or part of other's. The number of lots from either direction is a more useful comparison, nowadays, to consider zero sum as a concept.

A relative sense of zero sum, that small-time traders lose most of the time and high-stakes traders win most of the time, does include traders. A sentiment index, contrarian, suggests this is the case, and from this, a marketmaker broke r's clientele, all small-time, is negative. Further, that broke r's clientele is, in a way, highly negative sum, if you consider banker-marketmaker quotes/volume slippage.

The forex market, from what I understand of it, separates bankers' / corporations' trades, that is, high-stakes trades, from small trades with any retail broke r.
There's got to be slippage between the two sides at any one moment, such as occasionally different quotes and/or volume for a certain broke r.
How a marketmaker type of broke r takes the other side at the same time as matching their clients' lots to bankers', may create further slippage without regulation.

-----

NOTE:
I had concluded, as a paragraph after the one above, the following:
"Slippage in such a nonstandard, unregulated market devalues the possibility of there being zero sum, that is, during comparison of all the money value at one pip to see if that devoted to long and short are the same: Only on the banker/corporation side or one individual broke r's side, is it likely you can do so."
Now, I realize how very off this statement is. Slippage does not devalue zero sum, since a broke r's job is to complete the zero-sum loop. In being close to suggesting that trader groups are bs broke rs (who have and/or use several indicators against their clients: they have access to the banks' order flow, virtual nondisclosure of some change in the broke r's rules, playing with the nonstandard feed or the spread, and slowing or shutting down the platform for whatever reason), small-time traders using them, banks, corporations, and ECN traders, I was trying to deal with how fractured the forex market's structure is, and made a error.
  • #644
  • Sep 26, 2010 6:38am Sep 26, 2010 6:38am
Zero Sum,

NO in short!!

you've got to factor in :-


1. If the market is all buyers and no sellers ie after news, then the price can move hugely on low volume.
2. If it was Zero Sum they'd be no point playing it.
3. Loses merely move to people profiting, basically from retail to funds sadly for us.
4. Although yes someone has to sell for someone to buy, if doesn't mean that the seller didn't make a profit and the buyer won't also later make a profit.
5. as Chicky points out, it's a negative sum game due a spreads.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #645
  • Sep 26, 2010 6:46am Sep 26, 2010 6:46am
Quoting Fudomyo
You don't need to believe stuff works, you need to know you can make money with it even if it's mediocre.

Everyone uses different tools differently. It comes down to the operator.
You could just trade 2 MAs and be profitable if you understood not to trade during tight consolidations, near critical support, or during times of low volatility. If you don't apply conditions to tools, then they will fail because no tool works 100% of the time, because the market itself doesn't work 100% of the time.

So, part of it comes down to recognizing...

  • #646
  • Sep 26, 2010 6:46am Sep 26, 2010 6:46am
Holy crap. The heat is on here. Grandma told me not to worry my head about things I can't explain to her in under two minutes.

So while you're beating the living shit out of each other, I better try to make it a positive sum game for myself. It's a challenge.
forget about tomorrow, just steal away into the night
  • #647
  • Sep 26, 2010 7:55am Sep 26, 2010 7:55am
Quoting spekitox
Holy crap. The heat is on here. Grandma told me not to worry my head about things I can't explain to her in under two minutes.

So while you're beating the living shit out of each other, I better try to make it a positive sum game for myself. It's a challenge.
Well it's a negative sum game for 99% of retail, positive for 1% and positive for 100% of funds which tells you something.


Best bet, is to work for the man I guess.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #648
  • Sep 26, 2010 8:49am Sep 26, 2010 8:49am
  •  Czech
  • | Joined Feb 2010 | Status: You Don't Know What You Don't Know | 111 Posts
Quoting Turveyd
1. If the market is all buyers and no sellers ie after news, then the price can move hugely on low volume.
This has nothing to do with any "sum"
Quote
2. If it was Zero Sum they'd be no point playing it.
There'd be no point in playing it without an edge. Sounds kind of familiar.
Quote
3. Loses merely move to people profiting, basically from retail to funds sadly for us.
This is the most accurate thing you've said in your last two posts.
Quote
4. Although yes someone has to sell for someone to buy, if doesn't mean that the seller didn't make a profit and the buyer won't also later make a profit.
This has already been addressed and is completely irrelevant
Quote
5. as Chicky points out, it's a negative sum game due a spreads.
This has been pointed out by myself and others over half a dozen times by now.

Quote
Well it's a negative sum game for 99% of retail, positive for 1% and positive for 100% of funds which tells you something.
What on earth do you think negative sum means? I'd love to see your personal definition. It's a negative sum game. There aren't different games for different participants.


ha-pattern- i need to wake up before i try to respond
  • #649
  • Sep 26, 2010 9:33am Sep 26, 2010 9:33am
  •  Czech
  • | Joined Feb 2010 | Status: You Don't Know What You Don't Know | 111 Posts
Quoting ha-pattern
The forex market, from what I understand of it, separates bankers' / corporations' trades, that is, high-stakes trades, from small trades with any retail broker.
There's got to be slippage between the two sides at any one moment, such as occasionally different quotes and/or volume for a certain broker.
I'll acknowledge that. But i submit that for every position taken with a retail broker, the broker had to (at the very least) take the exact opposite position against you. I don't think it matters that people are being quoted differently across brokers because the bottom line is that you are never simply buying something. Someone is selling and someone is buying.

Quote
How a market-maker type of broker takes the other side at the same time as matching their clients' lots to bankers', may create further slippage without regulation.
Slippage in such a nonstandard, unregulated market devalues the possibility of there being zero sum, that is, during comparison of all the money value at one pip to see if that devoted to long and short are the same: Only on the banker/corporation side or one individual broker's side, is it likely you can do so.
I don't see why slippage devalues the negative sum idea. I see slippage as a function of zero or negative sum trading. Nobody would sell to you at that price, so price was moved up until sellers were found. (whether that seller is locally at your broker or in the world-wide market shouldn't matter)
If the bucket-shop broker quoted you away from the real market they STILL took the opposite side of your trade.

I agree that it would be impossible to actually sum all orders but I disagree that, that makes it less of a"negative-sum" or what have you.

In any event, I'm not a game theory expert. If I'm completely off my mark, I'd be interested to learn more about how slippage detracts from a zero-sum. Thanks for responding.
  • #650
  • Sep 26, 2010 9:39am Sep 26, 2010 9:39am
Wow this is unbelievable guys.

I went to sleep 11 hours ago. All I said was "Forex is a zero-sum game".

Then its now come down into an argument with all the lip and verbal nonsense.
"The trend is your friend, until the end."
  • #651
  • Edited 10:10am Sep 26, 2010 9:48am | Edited 10:10am
  •  Czech
  • | Joined Feb 2010 | Status: You Don't Know What You Don't Know | 111 Posts
Quoting ForexRookie
Wow this is unbelievable guys.

I went to sleep 11 hours ago. All I said was "Forex is a zero-sum game".

Then its now come down into an argument with all the lip and verbal nonsense.
Some people do get emotional but I'd say arguing is part of the process. If i present something to the best of my knowledge and someone can definitively disprove my point then I've actually gained a new understanding and gotten something for being here. Sometimes being a little abrasive brings out the counter-points more quickly.

edit: some people won't be humbled. I think these are usually the "futile traders" as defined by Harris.
  • #652
  • Edited 1:46pm Sep 26, 2010 1:28pm | Edited 1:46pm
Quoting Czech
I'll acknowledge that. But i submit that for every position taken with a retail broker, the broker had to (at the very least) take the exact opposite position against you. I don't think it matters that people are being quoted differently across brokers because the bottom line is that you are never simply buying something. Someone is selling and someone is buying.

I don't see why slippage devalues the negative sum idea. I see slippage as a function of zero or negative sum trading. Nobody would sell to you at that price, so price was moved up...
You're right. The market is zero sum, period.
I changed the post, so others know what you were talking about at the same time my post doesn't completely mislead anyone.

Anyhow, it was interesting comparing 'distribution of outcomes' with zero sum.
Good trading to you.
  • #653
  • Sep 26, 2010 1:46pm Sep 26, 2010 1:46pm
Maybe if depends on your definition of " Zero Sum " the wall street traders aren't driving around in ferrari's because it's a Zero Sum game I can assure you.
Nothing to it, but to do it!!! Stick to the plan FOOL!!!!
  • #654
  • Sep 26, 2010 1:58pm Sep 26, 2010 1:58pm
Here, you can argue with this guy. He says it a lot better and all I have to do is copy and paste. Convenient 'ay.

"Is Forex Trading a Zero-Sum Game?

By Ed Ponsi, President, FXEducator.com

There is a misconception among some traders that every trade must have a winner and a loser. There is a great deal of misinformation out there, and there have even been books published recently that incorrectly state that Forex trading is a zero-sum game. In order to clear up the confusion created by these inaccuracies, let's first understand the meaning of that phrase.

Suppose you place a friendly bet with an acquaintance on the outcome of a football match. Each of you puts up an equal amount of money, let's say $100, and at the end of the game, one of you will walk away with $200 and the other will be $100 poorer. That is a zero-sum game in its purist sense; unless the game ends in a tie, there will be one winner and one loser, end of story.

Now let's apply this concept to the currency market; suppose you enter a long position on EUR/USD and at the same time, another trader takes a short position in the same currency pair. The broker simply matches the orders and collects the spread. This is exactly what the broker wants, to keep the entire spread and maintain a flat position.

Does this mean that in the above scenario one party has to win, and one must lose? Not at all, in fact both traders can win or lose; perhaps one has entered a short-term trade and the other has entered a long-term trade. Perhaps the first trader will take a profit quickly, but there is no rule that states the second trader must close his trade at the same time. Later in the day, the price reverses, and the second trader takes his profit as well. In this scenario, the broker made money (on the spread) and both traders did, too. This destroys the oft-repeated fallacy that every Forex trade is a zero-sum game.

By the way, stock trading is not a zero-sum game either. Suppose you buy 100 shares of XYZ at $40, and sell it at $50. Another trader buys it from you at $50 and sells it at $60. Yet another trader buys it at $60 and sells it at $70. Which trader lost money? None of them did, they all made $10 per share. What about traders who are short XYZ? There is no rule that states that anyone has to short XYZ stock, and it is highly unlikely that there are as many shorts as there are longs, or more precisely, that there are as many shares sold short as there are purchased long.

What type of trade can be accurately called a zero-sum game? Options come to mind; suppose you purchase some XYZ call options, where did they come from? In order for you to purchase those calls, someone else has to sell or "write" them. If the price of XYZ stock reaches the strike price and beyond, the buyer wins, and if it fails to do so, the seller wins. While this represents a true zero-sum game, it is clear that this situation is the exception, not the rule. Trading can be a zero-sum game, but that isn't always the case. I just wish people would think about these things a bit more deeply before they state or write that trading is a zero-sum game."
  • #655
  • Sep 26, 2010 2:14pm Sep 26, 2010 2:14pm
Would it be a good idea to open a new thread regarding the zero/non-zero discussion because this thread was supposed to have "no more BS".
  • #656
  • Sep 26, 2010 2:15pm Sep 26, 2010 2:15pm
Quoting TradeRunner
Here, you can argue with this guy. He says it a lot better and all I have to do is copy and paste. Convenient 'ay.

"Is Forex Trading a Zero-Sum Game?...
Its clear that the guy that wrote that article is either an idiot, or more likely trying to deceive idiots. After all he is selling courses, so of course he would have to convince the naive, that "hey, we can all win".
But to all of you that are saying that forex is not a zero sum game, let me ask you this: When i win, where is that money coming from? Because what you are essentially saying, is that i could make money, without anyone losing it. Keeping in mind that unlike in the stock market, wealth can not be created in forex.
Stubbornly persistent
  • #657
  • Sep 26, 2010 2:17pm Sep 26, 2010 2:17pm
Quoting mikkom
Would it be a good idea to open a new thread regarding the zero/non-zero discussion because this thread was supposed to have "no more BS".
thank you... and yes!
Time hides Nothing
  • #658
  • Edited 2:50pm Sep 26, 2010 2:20pm | Edited 2:50pm
  •  Czech
  • | Joined Feb 2010 | Status: You Don't Know What You Don't Know | 111 Posts
Quoting Turveyd
Maybe if depends on your definition of " Zero Sum " the wall street traders aren't driving around in ferrari's because it's a Zero Sum game I can assure you.
OK, tell me what "Zero Sum" means to YOU.


edit: Traderunner, i already addressed that quote made by the President of a company that charges for fx education here. (Can't imagine he has any motivation to mislead) Maybe you should phone him and find out how to respond?
  • #659
  • Edited 3:11pm Sep 26, 2010 2:25pm | Edited 3:11pm
But to settle this Ive blown the cobwebs off my old Larry Harris book and will share some of what he has written, for those who dont know Larry Harris wrote the book on market microstructure

...here we go:

"The zero sum game All trades involve two or more parties. The Accounting gains made by one side must equal the accounting losses suffered by the other side" (Harris, 2003, p. 8 ).

(*Emphasis on the words accounting added)


"Trading is a Zero- sum Game in an important accounting sense. In a zero- sum game, the total gains of the winners are exactly equal to the total losses of the loses. Trading is a zero sum game because the combined gains and losses of buyers and sellers always sum to zero. If a buyer profits from a trade, the seller loses the opportunity to profit by the same ammount. Likewise if a buyer loses from a trade, the seller avoids an identical loss

Successful traders must understand the implications of the zero-sum game. To trade profitably, traders must trade with people who will lose" (emphasis added), (Harris, 2003, p 176).
.

"Since trading is a zero sum game in trading profits, dealer profits are buy-side transaction costs..." (Harris, 2003, p 205).

"Since trading is is a zero sum game, speculators and dealers cannot profit on average if they trade only amoung themselves. They can profit only if utilitarian traders are willing to trade. Markets therefore only exist when utilitarian traders are willing to trade. This fact suggests to me that the welfare of utilitarian traders ultimately is more important than the welfare of profit motivated traders. You may disagree" (Harris, 2003, p 207).

*According to Harris, 2003, Utilititarian traders are those who trade for some benefit other than trading profits, such astrading to reduce risk (hedgers), trading to move money back and forward through time (investors and borrowers), trading for entertainment (gamblers), Trading to exchange a lump sum into a different currency (Foreign exchange) etc.

And Finally...

"Most active managers cannot beat the market because transaction costs - brokerage commissions and management fees - reduce performance in what is otherwise a zero - sum game" (Harris, 2003, p 488)
Time hides Nothing
  • #660
  • Sep 26, 2010 2:39pm Sep 26, 2010 2:39pm
I'll tell you what's a zero sum game. Employment. I grew up in the 60s, back then everyone had a job. I for one am a tumbler.. watch the writing on the wall
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