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Is trading a zero sum game?

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Anton Nel
36963
Anton Nel 2013.05.14 16:49 
  • 68%
    (21)
  • 32%
    (10)
Total voters: 31
Anton Nel
36963
Anton Nel 2013.05.14 16:54  

Definition: What is a zero sum game?

A game in which the total of all the gains and losses is zero.

Other word: Result of a zero-sum situation is...if one gains, it means others have to lose.

Alain Verleyen
Moderator
30707
Alain Verleyen 2013.05.14 17:59  
ROMAN5:

Definition: What is a zero sum game?

A game in which the total of all the gains and losses is zero.

Other word: Result of a zero-sum situation is...if one gains, it means others have to lose.

Obviously it's a zero sum game, what it could be other ?
Tonny Obare
28904
Tonny Obare 2013.05.15 07:54  
Everything that involves money is zero sum. Even if someone pick pockets you its zero sum.
Alain Verleyen
Moderator
30707
Alain Verleyen 2013.05.15 08:13  
I am curious to know the explanation of people who voted 'no' ?
Marco Romano
914
Marco Romano 2013.05.15 12:11  

Hi guys, i voted "no". Precisely zero sum situation is when "if the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero." (wikipedia docet :) )

I think that without considering transaction costs forex is an example of zero-sum game. Anyway if you consider that brokers win always :) situation become different, i would like to do a stupid example based on the coin flip :)

i bet 10 dollars and you bet 10 dollars on a coin flip, total money in the game: 20$ but the "coin-flipper" ask you 1$ and he asked me 2$ in order to play (...mr. coin-flipper hates me :)) 

now i loose 10$ and you win 7$. Game sum is -3 

But if we consider the brokers as "special players that win without betting " then the forex is a zero-sum game :) 

Don't you think so? 

Alain Verleyen
Moderator
30707
Alain Verleyen 2013.05.15 12:32  
nemux:

Hi guys, i voted "no". Precisely zero sum situation is when "if the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero." (wikipedia docet :) )

I think that without considering transaction costs forex is an example of zero-sum game. Anyway if you consider that brokers win always :) situation become different, i would like to do a stupid example based on the coin flip :)

i bet 10 dollars and you bet 10 dollars on a coin flip, total money in the game: 20$ but the "coin-flipper" ask you 1$ and he asked me 2$ in order to play (...mr. coin-flipper hates me :)) 

now i loose 10$ and you win 7$. Game sum is -3 

But if we consider the brokers as "special players that win without betting " then the forex is a zero-sum game :) 

Don't you think so? 

You don't have to give a special place to brokers, trading considered as a whole is zero-sum.
Tonny Obare
28904
Tonny Obare 2013.05.15 13:31  

Even your example of a coin toss with a fee for the coin flipper is zero sum. Whatever the others gain is from what you lose. Roman defined his poll as:

"Definition: What is a zero sum game?

A game in which the total of all the gains and losses is zero.

Other word: Result of a zero-sum situation is...if one gains, it means others have to lose.

 

So in your example the total of all the gains $7+$3 is equals to $10 and the total loses is also $10. So its zero sum. 

Sergey Golubev
Moderator
55331
Sergey Golubev 2013.05.15 14:08  
If we are talking about "broker is not my friend" so - yes, that is true.
Marco Romano
914
Marco Romano 2013.05.15 14:50  
tonny:

Even your example of a coin toss with a fee for the coin flipper is zero sum. Whatever the others gain is from what you lose. Roman defined his poll as:

"Definition: What is a zero sum game?

A game in which the total of all the gains and losses is zero.

Other word: Result of a zero-sum situation is...if one gains, it means others have to lose.

 

So in your example the total of all the gains $7+$3 is equals to $10 and the total loses is also $10. So its zero sum. 

ok... and who is the participant which earned $3? Broker? That can be true and i agree with that and in this case it's a zero-sum game.

But, as i said before, that's right if you consider broker as a participant who always wins. Anyway ROMAN gave an "easy" definition of zero-sum game because the correct definition is "the total gains of the participants are added up, and the total losses are subtracted, they will sum to zero"

If we agree the broker is a participant then it means that we are going to play in a game where a player always wins without risk :) 

For this reason we can say

"Theoretically the trading in the forex market is a zero-sum game but in presence of any kind of taxes applied to the game it becomes negative or it's a zero-sum but there are one or more participants who earn always without risk"

That's logically correct :) 

Marco Romano
914
Marco Romano 2013.05.15 14:53  
newdigital:
If we are talking about "broker is not my friend" so - yes, that is true.
Yes it just so :)
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