Is it compensated the winners' profit by losers' cost?

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Hi guys

All of us have listened that market is zero-sum...

But what is the differences between market trading and bet or gambling?

What's your Idea?

 
imran_rajan:

Hi guys

All of us have listened that market is zero-sum...

But what is the differences between market trading and bet or gambling?

What's your Idea?

Our Idea? That you’ve joined the forum not to code, test, share results or exchange ideas - but to bla-bla about abstract concepts everyone else already Googled back in 2009.
 
Imran Rajan:
Hi Imran,

it's a good question. Markets are not strictly a zero-sum game (like poker) although short-term trading can resemble one, where one’s gain often comes from another’s loss.

However, the market as a whole can create value over time, and participants have different intentions (some hedge, others invest or speculate) which makes it fundamentally different from gambling or games of chance.
 

i could never "buy" that claim of "zero -sum game".

If there was 0 traders on fx, there would still be market currencies governed by stock markets and consumers, therefore, i could never "buy into" that idea.

 

It's important to distinguish between different market participants. Not everyone is trading to make a profit. Central banks, exporters and importers, and long term hedgers move money for other reasons.

Because of that, Forex is not a pure zero sum game. The market is influenced by real economic flows, not just speculation.

However, at the speculative level where most retail and institutional traders operate, it often behaves like a zero sum game. One trader's gain usually comes from another's loss, after spreads and commissions.

For retail traders, it's even closer to a negative sum game once transaction costs are included.

That is why consistent success depends less on beating the market and more on having a statistical edge, solid execution, and proper risk control.

 
The key difference is that disciplined forex traders approach the market with strategies and risk management rather than just hoping for lucky outcomes. However, many retail traders treat forex more like gambling by taking excessive risks without proper knowledge or discipline ,but I have had success with random uncorrelated pairs . 
 

Truth be told, there are trading forums (which shall remain nameless here) that are rampant with casino advertising. I can only assume that the casinos know that there are irresponsible people trading financial markets. For those irresponsible people, there is little to no difference between a financial market and a casino. Sadly, a gambling addict will wager on almost anything including financial markets.

On top of that, all financial markets are not equal. Take over-the-counter (OTC) forex and CFD (contract-for-difference) broker-dealers, for example, that have written trading agreements that openly state that they are counterparty to your trades. This means that they are on the opposing side of every trade that you place. In contrast, a centralized futures market such as the Chicago Mercantile Exchange (CME) is basically a free-for-all where every trader is trading against all of the other traders. There are also major differences between how OTC broker-dealers versus exchange brokers get paid, but that is outside of the scope this thread.

On the other side of the coin (pun intended)... If it were possible to come up with a statistically significant winning strategy for gambling, it would cease to be gambling. At one time, it was mathematically possible to employ a matrix having a 50.1% win rate to a blackjack game. As soon as the casinos discovered the matrix, they reduced the blackjack hand payout from 200% to 150% and that more than killed the 0.1% edge. This is the only "strategy" that I'm aware of that ever applied to gambling.

I also have my doubts about people who place trades in the financial markets based on news that they're watching. If you can't show me your trading strategy on paper then as far as I'm concerned, you don't have a strategy. To me, this is gambling.

IMHO, real trading is a actually a specialized form a data forecasting and it has a lot to do with identifying data patterns that repeat over time. Again, if you can show me a statistically significant profitable strategy on paper then you have something that definitely is not gambling.

 
Imran Rajan:

Hi guys

All of us have listened that market is zero-sum...

But what is the differences between market trading and bet or gambling?

What's your Idea?

Imran,
It only becomes gambling when you trade without a strategy, edge, or risk management. Retail FX, especially OTC, often behaves like a negative-sum game due to spreads and broker models—many retail traders lose because they treat it like a casino. But with statistical methods, proper execution, and discipline, trading is more like applied forecasting than gambling. It's not about the market being zero-sum—it's about how you operate in it.
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