Is stock trading a zero sum game?
Sunday, March 23, 2014
, Posted by Ryanita at 8:57 AM
Pedro P
Im a beginner trader and I already know that forex is a zero sum game. Stealing money from other people using Forex is bad...
I want to know if stock, commodities and EFT is also zero sum.
Thank you!!!
Answer
Too bad that peaceandlove does not agree that forex is a zero sum game. Either he doesn't know what a zero sum game is or just can't understand it.
Anyway, a zero-sum game is a game in which for every dollar earned somebody else loses a dollar. Virtually all derivatives are zero sum because you gain $1 on a derivative only if your counterparty loses $1. That means forex and commodities are generally zero sum because they are usually traded based on some kind of derivative. Spot commodities are not zero sum because if you own gold and gold prices go up, you have earned money without taking it from anyone else.
Stocks are not zero sum because everyone owning the stock can make money at nobody's expense if the stock price goes up. ETF's are similar to stocks although some ETF's contain only derivatives so those would be zero-sum.
I do not agree that "stealing money from other people using forex is bad". If someone else loses in forex for you to gain they were either speculating in which losing is part of the process and must be accepted or hedging in which case they are paying for their risk reduction by losing money. There is nothing immoral IMHO about trading forex. It's really clear that forex markets in general serve a public good by facilitating international trade by allowing both buyers and sellers to hedge out currency risk. How can it be immoral to contribute to a process fairly that serves the public good?
Too bad that peaceandlove does not agree that forex is a zero sum game. Either he doesn't know what a zero sum game is or just can't understand it.
Anyway, a zero-sum game is a game in which for every dollar earned somebody else loses a dollar. Virtually all derivatives are zero sum because you gain $1 on a derivative only if your counterparty loses $1. That means forex and commodities are generally zero sum because they are usually traded based on some kind of derivative. Spot commodities are not zero sum because if you own gold and gold prices go up, you have earned money without taking it from anyone else.
Stocks are not zero sum because everyone owning the stock can make money at nobody's expense if the stock price goes up. ETF's are similar to stocks although some ETF's contain only derivatives so those would be zero-sum.
I do not agree that "stealing money from other people using forex is bad". If someone else loses in forex for you to gain they were either speculating in which losing is part of the process and must be accepted or hedging in which case they are paying for their risk reduction by losing money. There is nothing immoral IMHO about trading forex. It's really clear that forex markets in general serve a public good by facilitating international trade by allowing both buyers and sellers to hedge out currency risk. How can it be immoral to contribute to a process fairly that serves the public good?
About trading easy-forex?
David Juni
I would like to trade currencies online using easy-forex.. but i really don't know much about it..
How much they charge for each trade?
How much fees i should pay every month minimum?
If i make some money from trading will it be transferred to my bank account immediately, or i should cancel my forex account to have my money back?
Answer
Playing Forex can appear alluring, but the majority of people who try it lose money. All you have to do is do a web search on the words "Forex" and "lose" to see this is the consensus.
Forex is similar to what we call a "zero sum" game. You are making a bet with someone else about whether a currency will rise or fall. For every winner there has to be a loser. The net winnings of everyone combined equals zero. If you are smarter than the average player, you may make money. If you are dumber than the average player, you are likely to lose money. Most of the people making the "bets" in Forex are highly trained professionals at banks and other institutions. You are unlikely to beat them at this game.
Actually Forex is not quite a zero sum game. It's a slightly negative sum game as the Forex broker takes a small percentage each time in the spread. It's a small amount but over a hundred trades, it ends up being a considerable amount of money. So the average player is likely to lose money, and remember the average player is a highly trained professional and probably smarter than you.
There is a lot of luck in Forex, and if you play it, you will have some periods of time where you make money. This is usually because you are having a lucky streak, not because you have suddenly become an expert Forex player. However, most people are unwilling to admit their success is due to luck. They become convinced they have a system that works, and lose a lot of money trying to refine it.
Further complicating the problem is the large number of Forex scams on the internet. Most Forex websites are of questionable honesty. You will find many people on the Internet that claim they made a lot of money using Forex. They are usually liars trying to make money. They will say: "Go to Forexcrap,com/q2347." The "q2347" is a signal to the Forexcrap site that you are being referred to them by "q2347." If they sell something to you, "q2347" gets a kickback. These coded signals can be hidden by different methods in the link. Other people will refer you to their own private website or blog for the purpose of trying to get money off you. Also there are a good number of trolls out there that like to pretend they are successful forex traders just for the fun of it.
I would recommend not trying to do Forex at all, unless you are a trained professional. It's like playing poker with people better than you, with the house constantly taking a small percentage from the pot.
Read the warnings in the links below:
Playing Forex can appear alluring, but the majority of people who try it lose money. All you have to do is do a web search on the words "Forex" and "lose" to see this is the consensus.
Forex is similar to what we call a "zero sum" game. You are making a bet with someone else about whether a currency will rise or fall. For every winner there has to be a loser. The net winnings of everyone combined equals zero. If you are smarter than the average player, you may make money. If you are dumber than the average player, you are likely to lose money. Most of the people making the "bets" in Forex are highly trained professionals at banks and other institutions. You are unlikely to beat them at this game.
Actually Forex is not quite a zero sum game. It's a slightly negative sum game as the Forex broker takes a small percentage each time in the spread. It's a small amount but over a hundred trades, it ends up being a considerable amount of money. So the average player is likely to lose money, and remember the average player is a highly trained professional and probably smarter than you.
There is a lot of luck in Forex, and if you play it, you will have some periods of time where you make money. This is usually because you are having a lucky streak, not because you have suddenly become an expert Forex player. However, most people are unwilling to admit their success is due to luck. They become convinced they have a system that works, and lose a lot of money trying to refine it.
Further complicating the problem is the large number of Forex scams on the internet. Most Forex websites are of questionable honesty. You will find many people on the Internet that claim they made a lot of money using Forex. They are usually liars trying to make money. They will say: "Go to Forexcrap,com/q2347." The "q2347" is a signal to the Forexcrap site that you are being referred to them by "q2347." If they sell something to you, "q2347" gets a kickback. These coded signals can be hidden by different methods in the link. Other people will refer you to their own private website or blog for the purpose of trying to get money off you. Also there are a good number of trolls out there that like to pretend they are successful forex traders just for the fun of it.
I would recommend not trying to do Forex at all, unless you are a trained professional. It's like playing poker with people better than you, with the house constantly taking a small percentage from the pot.
Read the warnings in the links below:
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