is Forex the Zero Sum Game

[mishak]

"Stocks" is a very strange game, it looks similar to a "pyramid scheme". Companies issuing stocks look like a central bank printing money
People are greedy and stop thinking about dividends, they are buying stocks for 2007's profits.
Those, who buy a stock at the top of pyramid - they lose (who bot Nortel at C$ 120, Worldcom at $50 and who will buy Google at 300 ). They are granpas/granmas who sell their bonds to join the wagon/buble.

The Forex is different. It is not a zero sum game because there are a lot of players with huge money who use the currency market not to make profit, but for their own reasons. Just think about exporters/importers and central banks

[yasirdxb]

In any open market,Winning traders can only profit to the extent that other

traders are willing to lose. Traders are willing to lose when they obtain

external benefits from trading. The most important external benefits are

expected returns from holding risky securities that represent deferred

consumption. Hedging and gambling provide other external benefits. Markets

would not exist without utilitarian traders. Their trading losses fund the

winning traders who make prices efficient and provide liquidity!

[ERA]

Originally Posted by forexenator

..... so both of us won in that day. Now I don't have to get someone money to make profit in this FX.

And for the two of you that won there is a corresponding position/positions somewhere out there that lost or are sitting on a loss. That loss could be temporary and they could be the winners and you or my account could be showing a loser that day.

Thats there the dealer comes in, sitting between players, be it between us traders or us and their liquidity provider. look at your bid/ask on your platform, its basically an invitation to you from the broker to do business with them.

[ERA]

Originally Posted by mishak

The Forex is different. It is not a zero sum game because there are a lot of players with huge money who use the currency market not to make profit, but for their own reasons. Just think about exporters/importers and central banks

Mishak, between your comments on the interest calculation thread and this latest comment, you are doing serious damage to your title and reputation as 'expert member' at MT.

The reason and intent for being in the fx market be it speculation/ hedge etc is of no consequence. Ulimately one persons profit if it is speculative or windfall if it is hedge is someone elses loss if it is speculative and a cost of doing business if it a hedge. Even if that hedge helped them make money else where in their business, as far as their fx dealings went they lost money, end of story.

[mishak]

ERA, thank you for taking care about my reputation

Let make it simplier for you
Suppose you go to Europe, you have to spend some money there. For meals, hotels, rent a car, museums, entertainment and to buy smth nice for your family. Europeans do not accept GBP everywhere, so you have to exchange 700 GBP for 1000 EUR.
Then you just spend this 1000 EUR and never buy back your pounds. (Looks like a small importer to me).

You probably agree that you is part of the forex market while making this exchange. Just explain to silly me have you won or lost, and how much ?
Or you was just break even

[ERA]

Mishak, I like your style, you keep your head up even when we rib you.

It's an interesting little puzzle that, even if the example is very simple.

I agree with you if I win or loss money I don't care. But seeing I am British in the example and basically I go long euro's short £ and the money changer/bank will go long£/short euros at the beginning of the trip. So now I have 1000 euro's in my pocket, I don't like spending so two weeks into my trip I still have 1000 euro's in my pocket, in that time we will say the £ has strenghtened 20 % against the euro. I go to have a beer or 2 or 3.
I end up having 5 beers, but gee! if I had just waited to change my money till today I could have got 6 beers for the same price in pounds. But who can buy 6 beers today who could only buy 5 beers 2 weeks ago.....the money changer.

[socrates]

Perhaps forex is not totally a zero sum game as so many believe it to be. Take the nfp release for example. How on earth does the price manage to jump so many points in a few seconds after the release?
Surely not everyone can get their orders in, causing the price to leap 100 pips or more in 2 seconds.
And what's more, there would then have to be an equal number of sellers all the way up (or down, depending on the figure released).

Just a thought.

[ERA]

Perhaps, depending on the data almost all the bids or offers probably dry up.

Say,if the nfp is very negitive for the dollar, who would wants to buy it?People who are short are adding to their positions, people who are on the sidelines are shorting and people who are long, realize thats it's the worst place to be are bailing. And with little bids on the dollar the only way out of the dollar is to continue to lower the offers untill the bids start coming in.