for every buyer there is a seller

[Technically Fundamental]

What about rights issues, printing presses, financial modelling for securitisation, corp bonds. Wealth is constantly being created so how can it be zero sum? Smackheads.

 

[gc1]

Everyone who is discussing shares are off topic. This is a forex discussion and forex is definitely a zero sum (or negative sum after trading costs) game. But yes there are many market participants who are not there to make a profit (importers/exporters etc). Even the banks who make a two way market probably don't make much after their costs (technology and people) are deducted, but by being part of "the market" it pulls other more profitable business their way.

 

[Technically Fundamental]

How can FX be zero sum when the printing presses never stop and the electronic creation of money is sky rocketing... esp with quantitative easing :-S

 

[SanMiguel]

If it wasn't for countries dumping money in forex to manipulate the market for the rest of their economy then noone would make anything?
Does it matter to retail traders who just jump along for the ride?

No assume noone manipulates the market, banks buy and sell according to where they think it's going. 1 bank wins another bank loses.

 

[Technically Fundamental]

That might be the case if banks weren't international.

 

[Rhody Trader]

... forex is definitely a zero sum (or negative sum after trading costs) game.

If we are talking only about spot or futures forex trading where there must be a short for each long then we have a zero (negative) sum market. If, however, you add in trade where all you're talking about is exchange of currencies, as you would do going on a trip, then it's not zero sum because it's a straight asset swap. For example, if you and I exchange Euro for Yen then one of us is long EUR and one long JPY. Neither of us is short so there's no matched exposure.

 

[Technically Fundamental]

How can it be if the mint isn't trading.

 

[SanMiguel]

If we are talking only about spot or futures forex trading where there must be a short for each long then we have a zero (negative) sum market. If, however, you add in trade where all you're talking about is exchange of currencies, as you would do going on a trip, then it's not zero sum because it's a straight asset swap. For example, if you and I exchange Euro for Yen then one of us is long EUR and one long JPY. Neither of us is short so there's no matched exposure.

So, if everyone in the financial world knows what they're doing, which they should do, then the only losers are those people purposefully dumping money to control their economic goals?

 

[squall321]

So, if everyone in the financial world knows what they're doing, which they should do

if they knew what they were doing then banks wouldn't need all our money, insurances companies wouldn't need bailout, hedge funds and investment banks like wouldn't blow up, etc etc

"finance" is such a ridiculous "industry".

 

[Rhody Trader]

So, if everyone in the financial world knows what they're doing, which they should do, then the only losers are those people purposefully dumping money to control their economic goals?

Firstly, as we well know, not everyone knows what they're doing. With the amount of new people coming into the game (at all different points) there is always going to be some group that is clueless.

Secondly, just because you know what you're doing doesn't mean you can't make mistakes or just be plain unlucky at times.

 

[Technically Fundamental]

Yeh people might know what they're doing but what will happen in the markets if if Kim Jong Il decides he's had enough? Or if another hurricane smashes america up? Or two massive companies decide they want to merge? What if someone finds a new gold mine? Fraud cases like Madoff force people to liquidate assets? Business, innovation and just people being people are always creating opportunities as well as differing economic affairs across borders.

 

[pedro01]

For Forex, most of the daily forex trades is on people sending money for business transactions. I do about $100,000 of USD->THB conversions a month. Not in Forex contracts but because people got an invoice & paid me.

In those transactions, we may take a small currency loss or gain, which goes on our books but is largely considered an irrelevance. At no point so we book a currency loss and kick ourselves because of thw 20 EMA, the Fibonacci or the cup & handle. We just see the transfer arrive in our bank and the accountant books the currency difference. We are just a small company, imagine all the wires going around the world every day to settle international invoices. That's the bulk of forex trades, not those guys sitting on their PCs hitting a contract here or there.

One of my friends is a market maker on a USD-THB forex desk. He deals with about 12 banks in all, putting through a lot of transactions and making the spread, which he controls. Sometimes there's someone on the other side of the transaction and sometimes it's him. Trust me - the market maker doesn't lose.

So - don't think there's always a loser & a winner either crying or shouting 'yahoo' on every forex trade. Sometimes, it's just an invoice getting paid & the parties aren't even paying attention to forex rates at all.

 

[kaciara]

if you lend X $ to FED and they give you back X $ +x % of printed/electronic money, who win?