Forex : A Zero Sum Game

[DarkMindFX]

The last thread mentioning this was 2013, so I am opening this new one. You guys can also comment.

Ive emailed both my forex account managers from different brokers for their anwers:

I would like you to answer the following questions:

Please explain this in simple terms, I am curious to know.

1) If I BUY EURUSD 1.00 lot, who is the one that SELL EURUSD 1.00 lot?
1.1) Will it be the broker or another retail trader?
1.2) If it is another retail trader, will the broker match us together?
1.3) If there is no retail trader that wants to SELL EURUSD at the same time with me that wants to BUY EURUSD? What will happen?

2) If EURUSD price goes up and I close the trade in profit, who has suffered the loss?
2.1) If the other retail trader or broker waits and EURUSD price falls and their order gets into profit and closes their trade with a profit, who has suffers the loss?

3) We both can profit in the above situation but who is on the losing side?

It's actually not a zero sum game. We (the traders) are ALWAYS paying for that stuff - it can be commissions, it can be spread... And of course acording to statistics 90-95% are loosing in this game. So their money are spread across the market - some part of them goes to winners, some part goes to brokers...

 

[EuroTrader]

It's actually not a zero sum game. We (the traders) are ALWAYS paying for that stuff - it can be commissions, it can be spread... And of course acording to statistics 90-95% are loosing in this game. So their money are spread across the market - some part of them goes to winners, some part goes to brokers...

Yes .. all of what you have said is true

 

[iMusingKiMi]

It's actually not a zero sum game. We (the traders) are ALWAYS paying for that stuff - it can be commissions, it can be spread... And of course acording to statistics 90-95% are loosing in this game. So their money are spread across the market - some part of them goes to winners, some part goes to brokers...

Absolutely yes. No difference as "EDGE" in casino for the house. The point is how could you use no matter on maths, technical, fundamental or whatever to bring the EDGE back on our favor.

 

[DarkMindFX]

Absolutely yes. No difference as "EDGE" in casino for the house. The point is how could you use no matter on maths, technical, fundamental or whatever to bring the EDGE back on our favor.

It's zillion dollar question
I'm not very experienced trader but... From what I've tried to so far I've made some intermediate conclusions: we have to be prepared to constantly change our trading strategies - i.e. I've got a toolset of 3-5 strategies and I'm usually trading using one of them. Once it starts produces losses I'm trying to figure out which one of others are suitable for current market conditions. Or I can try to adjust the one I'm using right now and if it fits - continue trading with it for 2-3 more months until again the condition will change.
Actually the major problem here is that FIRST you get losses and only THEN you realize that market has changed So what I'm working on right now is I'm trying to utilize ANNs to predict such kind of changes - becuase in fact markets are just reflection of people's behavior. So if someone points a gun on you there you don;t want to wait whether he is going to shoot or just kidding you So I want to be able to identify this moment - or at least when I'll hear the click of the trigger

 

[iMusingKiMi]

It's zillion dollar question
I'm not very experienced trader but... From what I've tried to so far I've made some intermediate conclusions: we have to be prepared to constantly change our trading strategies - i.e. I've got a toolset of 3-5 strategies and I'm usually trading using one of them. Once it starts produces losses I'm trying to figure out which one of others are suitable for current market conditions. Or I can try to adjust the one I'm using right now and if it fits - continue trading with it for 2-3 more months until again the condition will change.
Actually the major problem here is that FIRST you get losses and only THEN you realize that market has changed So what I'm working on right now is I'm trying to utilize ANNs to predict such kind of changes - becuase in fact markets are just reflection of people's behavior. So if someone points a gun on you there you don;t want to wait whether he is going to shoot or just kidding you So I want to be able to identify this moment - or at least when I'll hear the click of the trigger

Too many strategies in your head are not easy during live execution. Believe me, if a strategy really works, it usually work for 2-3 years, only some small implementation need to be done. Sorry, probably a bit difference with direction trading and quantitative trading but usually quantitative works more than 2 years.

 

[DarkMindFX]

Too many strategies in your head are not easy during live execution. Believe me, if a strategy really works, it usually work for 2-3 years, only some small implementation need to be done. Sorry, probably a bit difference with direction trading and quantitative trading but usually quantitative works more than 2 years.

Agreed But you don't need to execute the all at once. It's just a tools set - you just have a plan like"if market in condition A - then let's use strategy , if in B - strategy Y" etc. And if you have 3 (5 at max) for different kinds of situations - then what you really need to master - be able to understand as soon as possible when the market is changing.

 

[EuroTrader]

Agreed But you don't need to execute the all at once. It's just a tools set - you just have a plan like"if market in condition A - then let's use strategy , if in B - strategy Y" etc. And if you have 3 (5 at max) for different kinds of situations - then what you really need to master - be able to understand as soon as possible when the market is changing.

We should always keep and use more than 1 trading plan with us as that will allow us to do our trading with more profits and with the minimal amount of risks

 

[iMusingKiMi]

Agreed But you don't need to execute the all at once. It's just a tools set - you just have a plan like"if market in condition A - then let's use strategy , if in B - strategy Y" etc. And if you have 3 (5 at max) for different kinds of situations - then what you really need to master - be able to understand as soon as possible when the market is changing.

I have a colleague who is running almost 30 strategies daily and of course he is a coding expert. When you have too many strategies, that's the time software works well.

 

[DarkMindFX]

I have a colleague who is running almost 30 strategies daily and of course he is a coding expert. When you have too many strategies, that's the time software works well.

Does he run them on one single pair/instrument????

 

[iMusingKiMi]

Does he run them on one single pair/instrument????

Nope, on multiple commodities usually.