Why and how Win-Win in Forex is possible

Hey friends!

Because of ongoing judgements over my passion as a way to rob the weak in the markets, I'd like to explain how the other side of my winning trades is no way determined to LOSE money to me. The image explains everything. The only possible argument to bring forth after this is, most people get robbed of constantly anyway. Right. Because they trade by taking bigger or more losers than winners. They make their loss happen. I know what Im talking about, as I went through this pain for one full year, 5 days fulltime. By the way, my losses were by no means BIGGER. Almost NONE of my losses were bigger than 10 pips! Yes. But they completely outweighed my winners in sheer numbers, simply because of me staring at price and losing my faith if it wasn't tender to me right from the second.

See and discuss, but be aware of putting well-thought points only! Thanks.

Success and Insight everyone

I am a part time forex trader and your strategy is "5 days fulltime". What is suggestion for me to make forex trading a win-win game?

I don't understand your graph.

Look at your chart, sleep with it, wake with it, work with it, play with it, talk to it and then LISTEN. The CHART will talk to you. and if you HEAR what it is saying, then you have taken the first of many steps to create a strategy for a "win win game" (whatever that means!)

simply can not get what you are trying to say! two people who buy and sell at the same price and then square off the trade again at the same price can not be at profit at the same time, one would have to book a loss , for that particular tansaction.
eg.
if you bought a chicken from mr x for 10 $ and sold it back to him in the evening at 12$, you make quickfire 2$, and he loses in the transaction.
if he sells it again for 14, then its a separate transaction altogether, and you simply cannot state that he made a profit out of your 2$.

bru
can you elaborate your trading method by writing in down... kiss?

I think what you are trying to get at is that the forex market is not a zero sum game and that there does not have to be a loser for every winner. I believe this is incorrect though and the forex market IS a zero sum game and for every transaction there is a winner and a loser (not necessarily single entities but it is easier to think of it as such). This is a hard concept to grasp for most I think, it was for me, but the way I finally convinced myself of this fact is through the following hypothetical scenario.

Say we have a new market emerge. For every market there must be a product (be it currency or commodity) and for simplicities sake we will say that one person owns all the product. Now, this product is so fantastic that it will never go down even by a tick and will continue to go up forever, but nobody knows this. This is what most people who do not subscribe to the zero sum theory point to. If the price keeps going up then everyone is a winner, right? Wrong! So the person owning the product sells it. Wahoo, they have made money and they are a winner. The person who bought the product later sells it at a higher price and again, wahoo they are a winner. And so on and so forth. But, if each person who sold had not taken the offer and held onto the product they could have made a greater profit. So their sell transaction left them worse off in the long run and was in essence a losing transaction. Every sell transaction in this market is a losing transaction and although each person made a profit overall, they would have been better off never selling and so they were a loser in their sell transaction. This is called opportunity cost.

Hope this makes it easier for people to grasp the zero sum concept, it surely helped my little brain make sense of it all.

After thought - I guess the spanner in the works is that money is created from nothing (ie reserve banks just print it). And come to think of it they also destroy it and reduce the money supply sometimes. This devalues or overvalues the currencies worth respectively which is also subject to whether other reserve banks around the world are printing or destroying. I have a niggling feeling in my brain that this could jeopardise the zero sum theory. Jeez, this is a damn complicated topic. I am truly rambling now and contradicting myself to some extent. I haven't thought about the zero sum concept for a while because I could never quite put my finger on it. This need more discussion I think.

Anyway, for us traders as opposed to creators/destroyers I think this is essentially a zero sum game, but I am really confusing myself again on this topic

I probably shouldn't post this rambling post but I will anyway in hope of sparking some discussion on the half thoughts I have raised

What he means is that the person that "buys" his "position" can still make a profit off the transaction if he can sell it back to someone for an even greater price. Buy for $3 > Sell for $4. That second person buys for $4 and sells for $7. The second person actually made a greater profit. However, the third person isn't so lucky in this case since the price went down right after and he has to fork up the $4 difference ($1 from trader nr 1 and $3 from trader nr 2).

Of course his logic is flawed just because the "middle-man" also made money doesn't mean he didn't take money out of the market. It's not so much as "You are stealing from someone" but more "You are taking money out of the market". Profitable small time traders don't really affect the market, simply because it's so big so there's no real reason to feel guilty. But there is a microscopic effect and that is translated in taking money from the economy (In other words: from every person adding to the economy of the pair that you decided to short and closed off with a profit).

Succesful trading in the forex market redistributes wealth in your favor and that wealth has to come from somewhere. Of course you are making your own country richer (so if you are particularly patriotic that could actually be an incentive ) but only a small percentage of your profits are going to go into your countries coffers as taxes.

Agro was alot clearer in his example but screw it, I already typed this wall of text and I'm not letting it go to waste.

I agree with you all.

All I wanted to show is that the guy coming after me gets another price, but by no means needs to bleed for me. I make a nice return for my whole account, grabbing a ridiculous 20pips.
But the guy taking my position will make 200 pips and wont even notice it because is style is different one.

Yes, the last man buying before the trend's final death is always on the wrong side, BUT most people lose because they have strange entries and [b]stops that are tighter than my damn fist...



My strategy is watching with an empty mind!

I dont trade fulltime, I used to LOSE fulltime, people! Now, I watch prices for 1, 2 hours, and after this I am aware of wether Bulls or Bears are rising in power.

This is my way of watching the crystal ball, and as it is the pure sum of price movement, I dont suffer any obligatory failures anymore.

Work hard on understanding the move!

I still don't understand how this adds up with your first post. No matter how much leverage the other party is using, he will lose exactly the amount that you are winning. So how can this be a win-win situation?

The first chart says they take turns
Forex does range more than trend, after all.


It just seems like a psychological way to let go of missed opportunity.







P.S.: "If one gains, one loses" is an average built up from a tick chart. Per larger time frame bar, enough swings allows for both to win.
Just sayin'.

oh, so it's that time of year again is it? the same tired old zero-sum versus positive sum versus negative sum.

anyone who thinks trading is anything other than zero-sum is a retard.

people blur the line because all they see is money. but there is money IN the market and money everywhere else. the thing is that money in the market eventually affects the overall value of the money out of the market, but they are not exactly one and the same and things are never that simple and clear-cut when it comes to money which is why people can't figure any of it out.

i don't give a fuck who takes the other side of my trade or if they win or not. that's not how a market works. one winner does not equal a loser to whoever took the other side of the trade. it's volume in, then volume out. that volume moves from one person to many someones in differing amounts. it's a rare day that one person exactly trades some volume to just one other person, and then trades it back again at a profit or loss. 0 + 1 - 1 still equals 0... but in a market it's fractions mixed amongst other fractions over time that add together into some number, and then they get reduced over time by more fractions mixed with more fractions to end up back at 0. the volume ends-up flat, but the profit or loss depends on the prices at the times when you move those fractions in and out.

agro would suggest the markets are some kind of ponzi scheme where everyone somehow could potentially just keep winning "if only they held longer" and could sell at the top. rubbish! a market doesn't move if no one trades and just holds-out! everyone sitting on the bid waiting for someone else to flinch first is a no-liquidity market, or NOT A MARKET! in terms of currency trading it would require business transactions that flow through the market to cease so that there was no non-trading related transactions moving any volume, because as soon as you have an outside source affecting the price then everyone who is only in it for the trade starts trying to capture the inefficiency of the price as it stands now versus what it could be in the future, and that in itself feeds further inefficiency seekers and suddenly you have liquidity again and a market.

and the banks printing money doesn't change the zero-sum situation, it merely muddies it. more money in a country only dilutes the overall worth of the rest of the money in the country. if they use this magical newly created money to push volume into a market which then affects the current actual price then good for them. whatever. it's still just more volume coming in which gets moved onto others and eventually back out again. if the banks decide to push volume into a market with no intention of directly taking an opposite trade at some point then that's a bit different. in this case it's just a different kind of investment for them... a speed-bump if you will. they are simply injecting long-term volume to aid some cause that also aids themselves, if not purely themselves. in the end they will still nickle and dime it all back out of the market and mountains more over time with all of the rest of their trading. in the meantime they get their spread fees and mum and dad account fees from all of their customers who are fortunate to be in an economy (boosted by the bank, remember) that affords them the opportunity to park money in a bank and take out loans and get mortgages and so on. it's all just grease that makes the wheels spin faster on the money-making machine that the banks generally are.

you could just consider the banks injecting funny money into a market as free money / VOLUME to those who happen to be in the market at that time on the other side of that volume, but, again, they will stick nickle and dime it all back out one way or another. it's merely an investment in altering the price for their own eventual benefit over time. it's like buying a business. you lose on the purchase of the business, and then nickle and dime everyone while you own the business, and then hopefully sell for a profit once you are done with the business. there's an initial investment.... shaving profits off everyone over time..... then reverting back to not owning the business once sick of it all.

edit :

i should add... if a bank keeps finding itself needing to inject volume into a market but at a rate that they can't nickle and dime that volume back out slowly, or directly with opposing trades if the situation arises that they need to push the market the opposite way some time in the future, then obviously they are screwed. that is a failed business model and everyone who received their volume was better-off for it. the losers still lost when price was pushed too hard, but the winners gained more than the losers lost because the volume injected pushes the price further than just where the losers offload. you don't buy a business, sell products at a loss, then sell the business at a loss. similarly, you don't buy a business, nickle and dime, and then sell for an overall loss. that's all just bad business. same same, just different. (it's still a zero sum game, but the banks overall lost to everyone else, instead of the banks winning against everyone else and a small pocket of individuals also winning against the majority who feed them overall profits.)

/edit

the market as it's own little ecosystem is zero-sum, whether or not the actual volume of currency floating around in the real world increases or decreases. anyone who is on the right side of a trade when volume is injected by a bank or by a company needing to do international business is just fortunate to be on that side of things.... some people see this as being a one way trade that permanently injects volume that doesn't disappear, but it's not. the volume still expands and contracts because other companies eventually do opposing trades that will at some time tip the scale back the other way, or further. back and forth, back and forth the volume goes, and in the middle of all of this keeping things moving (the oil) in the meantime are all of the tech traders trying to arb each other to death (some succeeding and some not)..... hey presto, now we are teetering on the topic of what exactly?

fundamentals, and boom / bust cycles, and the tech traders sitting in between.

the amount of overall currency can, and does, change due to the banks fucking about. this has similarities with when a company issues more shares. but when you blow your 100th account and refund it with another $20 does this mean you have created a positive-sum market since you are injecting further money into the market? of course not! your losses just get moved to someones, or a group of someones, profits. you still moved some lot size of volume into and then out of the market, and the differing price busted your account. other people did the same and at some point in time in the future someone will die holding profits that were your losses from today.

in summary : i can't, off the top of my head, think of anything that is not zero sum. anything! someone show me a situation that is not overall a zero-sum situation.

from a PERSPECTIVE of our own accounts we WANT to SEE a positive-sum game due to a positive trading expectancy, but in general most see a negative-sum situation on their account and their losses are nickle and dimed away bit by bit to the winners who have a positive expectancy.

what is money? money is just a unit that we exchange amongst ourselves. it represents work / effort / efficiency / demand, which we then exchange for goods, or we exchange goods for others work / effort / efficiency / demand. i can't build my own car, but i can work at macdonalds for 50 years and save up to buy some shitty car. my mediocre work over time = a car. i exchange the money, which represents my work over time, for the work of someone else. others build parts of a car, their company sell the car to me, i pay the company, and the company distributes my payment to the workers. it's all just trade after trade for work over time.

specialists get paid more than grunts because anyone can be a grunt but it takes time and effort to be a specialist. it's a trade. a grunt gets underpaid for being mediocre and disposable, while a specialist gets overpaid because there is no one else to do what they can do. the specialist has an edge over the grunt through sheer invested time, energy, effort, and accomplishment. they end-up with the fast cars and fast women while the grunt ends up with 3 teeth and a missing foot. it's just a trade, one way or another. effort / time / etc in = money out, or money in = effort / time / etc out. everyone in this sense is trying to capture an inefficiency. workers want to work where they are overpaid, and businesses want to find over-workers who don't slack-off and make mistakes and fuck things up. consumers want to buy shit cheap, and retailers want to sell shit expensive... you don't open an expensive restaurant in the poor part of town, unless you are a sadist.

energy is not lost, merely converted.

now shut the fuck up about zero sum, people! seriously. if you aren't able to conceptualize how it all interacts and relates then just accept that fact and move on and forget the debate within yourself over +/-/0 sum.

now let the thread get back to whatever it was actually about, which was NOT the 'sum' argument at all!

Welcome back nubs, good to see you back. Although I don't think we have ever done anything but argue and you sure are a rude son of a bitch, you are entertaining

As I stated, my example was a hypothetical scenario (for simplicities sake) arguing FOR the zero sum theory to counter the common argument put forth by non zero sum subscribers that if a market goes up forever then everyone is a winner and hence not a zero sum market. What they fail to realise is that the sell transaction in this market is a losing transaction even though the trade was a profit because if they had not sold then their counter-party's profit could have been theirs. Of course this is not a real life situation, but yes, this IS A MARKET, even if no transactions take place. Liquidity is actually the bids and offers within the market, once they are accepted then liquidity is reduced. If in the eyes of the world the hypothetical product keeps increasing in value day by day, then bids will continue to enter the market at higher and higher price then the market is moving, despite the lack of volume.

I sense from your post that you also have a slight niggle that money being created and destroyed may somehow disrupt the zero sum theory. I have not given any more thought to this issue yet, my post last night was written after a big saturday night at the pub so I was going off on tangents, but I think I may have disrupted my previous thorough belief that this is a purely zero sum game. It will require some serious pondering

No matter what though, for you and I and everyone else on this forum, it is in essence a zero sum game and you would be foolish to think of it in any other way for any practical purposes as opposed to philosophical purposes.

I remember reading one of darkstars posts years ago that stated that stocks were not zero sum because they pay dividends. You stated earlier to illistrate the zero sum concept that "0+1-1 still equals zero", but 0+1-1+a little bit equals a little bit doesn't it?

And what exactly was that. The post is not clear, that is for sure, but I am pretty sure that he is confusing himself and thinking that it is not a zero sum game just because the guy he sells to also ends up making a profit. As you say, "in a market it's fractions mixed amongst other fractions over time that add together into some number, and then they get reduced over time by more fractions mixed with more fractions to end up back at 0. the volume ends-up flat, but the profit or loss depends on the prices at the times when you move those fractions in and out". But many people can't grasp this and they see that they made profit and their counter party eventually made profit so they think it is not zero sum.

Even for a trending market which always goes up, the loser at any point of time is the last buyer which pushed the price to a new high.

His exit from his trade can only come from 3 possible outcomes
i) He sells it at a lower bid and thus takes a loss (his loss is the gain of the one who sold it to him)
ii) He sells it at the same price and transfers the loser status to the new buyer without realising any P/L
iii) He sells it at a higher price and makes a profit(Profit comes from the buyer who bought at a higher price)

You mean masochist. A sadist would have to drag poor people into his restaurant and then forcefeed them and make them pay the bill.

and yet, this is IMPOSSIBLE. someone MUST lose at some point the net value of whatever you consider to have been 'won'. a market can't go up forever.

.... which means absolutely nothing if no one actually gets off the book and hits the other side of the spread with a market order. if everyone sits on the bid then there is no market, regardless of how much volume is on the bid. this also relates the previous paragraph and is an important point.

that's not a market! you can't just have bids chasing after the price. you need sellers to sell, and either the buyers to then become sellers perpetuating the buy / sell liquidity cycle, or the buyers now hold onto their parcels as unwilling sellers who aren't on the offer and so the book dries up and you have no market. you can't hold forever. the door has to swing both ways.

you can't have one countries currency keep getting exchanged for another currency as eventually there will be no more original currency left to exchange. you can't have people forever buy more and more shares from a company as there is only a finite amount of shares available.

if you actually want to talk about real products and their seemingly forever rising prices which is partially inflation from printed money, and not just talk of market prices of some share or currency exchange, then here goes...

the normal talk of supply and demand are generally satisfactory for explaining market movements, however, it's not actually a fair comparison to compare retail pricing to that of shares or currency prices. the thing is that products and consumables are degrading non-fungible items and the demand is mostly a one-way street, with the producers of the product being the receivers of your money when all is said and done. most people are just consumers of any particular product, and rarely are they someone who re-sells.

more importantly, shares are fungible and non-consumable. to a degree they do degrade over time due to inflation, but not anywhere near the extent of retail products. whether or not the price of an item in a store keeps going up due to demand the item you hold will degrade in worth and eventually break or perish. you are on the losing side of that game unless you somehow manage to on-sell what you buy to some other sucker for a higher price than what you bought it (which is perfectly possible and is common small business). it's actually like retail items experience a fast-forwarded version of inflation where what you buy today is worth far less tomorrow simply because it is not fungible and you touched it or used it or ate it or whatever, and no matter what it will eventually perish over time.

although company shares are fungible and intangible, they do suffer the consequences of the companies actual financial health. your shares in xyz become worthless if xyz goes bankrupt and no one wants to buy shares off people wanting to sell their parcels. if google or apple fuck up and decide to change their business focus to washing detergents then you can guarantee your shares are going to be worth less than the cost of 1 bottle of google detergent or pine-fresh Apple fabric softener. buy and hold is never forever, so although in SIMPLISTIC theory it sounds great to buy some shares and watch the price rocket, that is rarely ever the case or the whole story. buy and hold still suffers inflation, and it still suffers the possibility of the company going to the toilet making what you have been holding as worthless.

no.

no, it IS a zero-sum game. the only problem people have is understanding that some players have extremely long timelines and others have extremely short timelines, and some have interests in the game that extend to outside of what traders see from within. this all makes it too hard for people to grasp.


what people are talking about with this whole positive / negative-sum argument that always comes up every 6 months is where money is magically created or destroyed. in the end this is simply not possible. yes, banks print money but this just shifts the worth of all other existing units. in that case it's like cutting a loaf of bread. you don't have more bread after you cut it into pieces, you just have more pieces. money = work / time / effort etc as per my previous post. you can't just magically create time or work or effort out of thin air and label it money. all that is happening is that the value of things related to that unit of money is altered when more money is printed. it might temporarily create specific disturbances in one particular monetary aspect, but this will eventually ripple-out into all areas and find balance within the financial world as a whole.

so, who is the other side of the dividends in your darkstar example? the profits of the company whose shares you own. it comes out of their pockets / profits because you supposedly 'own' a piece of that company and they give you the incentive to hold their shares in exchange for getting paid some token amount per share over time. money isn't magically created. this is designed entirely for people with your mindset, that is, that the market just keeps going up. yes, inflation influences everything to go up to some degree over time, but the true worth of something in the future may be far less than it is today despite perhaps having a higher dollar value in the future.

buy and hold, collecting dividends for some years, and then fluking-out a sell of the shares at the same price you bought them will net you what? some might say it nets them the dividends they were paid over the years that they held them, yet i would suggest that they actually lost money. i would suggest that the value of the dividend payments over time coupled with the neutral sell price of the shares when adjusted for inflation probably leaves you in the negative in terms of true profits. and this was me giving a somewhat neutral example with a perceived edge of dividend payments. this isn't specifically relevant to the 'sum' argument, but i felt was worth noting anyway as it is relevant to the 'buy and hold' mentality.

the point, as i read it, was to not overtrade yourself into oblivion recklessly. the point was to be trading when it is in your favor to do so, and otherwise keep the hell out until the situation is right.

and many are fucking stupid and only 'see' this because that's how they imagine it in their feeble minds, when the truth is something else far more complex (yet can be reduced to something simple).

anyway. i'm done. this isn't the thread to continue this.... plus it's been done to death.

yes, although i like the sound of that example.

i tend to mix those two up for some reason. either way it's a win, so...... yeah. same same, except not really.

thats good advice!!

Jeez nubs, I keep saying my example was hypothetical!!! Serves the same purpose as an analogy, to make complicated matters simple to understand.

Not impossible, just highly unlikely. If no one ever hits a bid or offer under the last dealt price then prices will never go down.

Wrong. You clearly don't fully understand the zero sum concept despite my easy to follow scenario. No one has to outright lose for a market to be zero sum, but someone has to make a 'losing' transaction. In my example, every sell transaction is a losing one as they would have made more if they held, so they have in essence lost in the form of opportunity even though their balance shows a profit on the trade. It is still a zero sum market even though nobody participating in this market has lost any real money.

It is a market. A market is a place where people come to buy and sell. Just because no one is willing to transact at the current bid/offer does not mean it is not a market.

Yes it is

More money is printed and more shares are issued. It all comes down to value, which is never finite. If everyone who owns shares does not want to sell at where people are willing to buy and value keeps increasing due to the fact that the rest of the world wants a piece of the action then the company can offer more shares to the public and raise more capital. It does not even matter if the company is worthless in real terms and does nothing but literally flush their capital down the toilet. The market place decides the value not the company or their operations. No market is a closed system, money can flow in and out.

I don't. When I say product I mean it in a broader sense. The product in my example is anything, currency, commodity, company etc.

You couldn't be more wrong. Money IS magically created out of thin air. Our whole monetary system is based on nothing of real tangible value. The value of money has almost nothing to do with the amount of money in the system. Value is derived by market participants. If the market as a whole decides that a country is printing too much money then they may decide that it has decreased the value of the currency and prices will go down. But they may not decide this.

The fed has been printing vast amounts of money for years, but still the market price fluctuates up and down. It can't be compared with cutting a loaf of bread at all. You are talking about a physical thing, not the value of the thing and of course if you cut it you have the exact same amount of bread. If you cut a loaf of bread in half that is worth $2 then the market may decide that each half is worth $1.10. This could be for a multitude of reasons, knives are really expensive, it takes work to cut it etc etc.

Anyway, printing money is not cutting the units in half like a share split (where the shares will reduce in value by whatever fraction they are cut), it is just adding more units. Unless the market decides this decreases the value by the fraction that the money supply was increased then in essence value is flowing into the market. As I have said markets are not a closed system. If units are flowing in and value is not decreasing accordingly every time units are added, then the zero sum theory falls down. It becomes 0+1-1+(a little bit) which equals a little bit. It could also go the other way making it overall negative (minus a little bit).

There is no other side. You are the company along with all the other share holders so you are saying that you are the other side to you. Again, markets are not closed systems and dividends are taken from profits that were gathered from people OUTSIDE the market. So the other side is outside the market and hence this market has taken in extra money. So everyone within this market now has a little more money to go around making it not a zero sum market.

Not my mindset at all, don't know where you got that idea?

You are probably right, this is not the thread. Maybe I will take these posts and start a new thread. I know you think it has been done to death, but I think I am adding something here for people to think about and I would like to discuss it further but it might go unnoticed and unread in this thread.


In summary - I think the key is that markets are not closed systems, money is flowing into them and out of them from/to the outside world. This is where the zero sum concept falls down, it assumes that markets are closed systems. The equation is no longer +1-1=0, it is +1-1 plus or minus a little bit equals plus or minus a little bit. Having said that, I think for any practical purposes regarding trading the zero sum theory works very well. Like all scientific theories (such as newtons laws of motion) they do not always tell the exact truth under all conditions but for all intents and purposes they are good enough.

thanks for confirming for me that you do, in fact, have no idea what you are talking about.

e.g. money has no value! really? i'll go pay for my food with bundles of sticks then.

everything you just typed i will simply say "refer to my previous 2 posts". virtually everything you just typed i shake my head in utter dismay.

i will note that as for dividends making a market positive sum, as you are arguing, i say you are totally wrong. IF you are going to start considering the outside monetary factors instead of just what is transacted between different parties within a market then you have to.... HAVE TO... include everything else, including inflation.

if you include inflation i believe you will find that your example is not positive sum, but is instead negative sum. so chew on that for awhile. you can cut this shit any way you like and spin any perspective you want and include one thing but not another. some argue that just because they pay a fee and / or spread that it's all negative sum, but fuck that shit that particular corner of money just goes to the broker and isn't magically lost. money is not magically created or lost, ever, unless you like to deface your money or are great at forgery. money can get printed by banks, sure, but this isn't magic money. it just shifts the value of all units in circulation to a different value. it may take some time, but it gets there in the end.

i really don't want to discuss this with you any further. if anyone else wants to agree with you then good luck to y'all. for someone who wasn't particularly sure of themselves as to whether they believed things were x/y/z sum or not, you sure seem confident now for some reason, and yet with flawed or plain wrong examples / explanations.

this forum....