Boy, I have been on fire the past couple of days I’m pushing out these posts so fast!! Ok here is another trading truism,’ Trading is a zero sum game , for you to win then another trader has to lose”
Well I don’t know if this applies to other markets but lets talk about the forex markets, The forex markets are made up of currencies changing hands, most of the large transactions go via the banks. They have to accept buys from those who want to purchase large amounts of foreign currency for other reasons besides trading, such as large purchases between businesses.. Most of the movement in the currency markets is not due to other traders trying to make a living. therefore when you make a trade , It doesn’t make sense that if you win a trade that takes money out of the pocket of a fellow trader.
What is money anyway? If you have ever watched the film Zeitgeist you will know that money is really debt, banks have the ability to lend 10 times any money that has been deposited with them. So they are lending something that doesn’t exist!! Lets say a person borrows money from a bank to buy a house, the bank lends them money that doesn’t exist, and the person then exchanges that money to the person who sells them the house. This money goes to another bank as a deposit. The bank then uses that deposit as a basis to lend 10 time that amount to other people. However that money does not exist!!!!
Money is really an illusion, a system that we are part of that has been created as a man made idea. If the banks are creating money that doesn’t exist and that money is ending up in the currency markets then the money that is being traded does not really exist. It is a game. When the banks started to go under and they were bailed out with billions if not trillions of dollars, did that money really exist? Where did it come from? The reason they were bailed out is so that the game could continue, and so they keep creating money that doesn’t exist which goes into the currency markets.
Why is this important for a trader to understand, well I personally don’t like the idea that if I win at trading I am taking the bread out of the mouth of another trader, that is an idea that stood in the way of my trading success. For me I replaced that idea with another idea which is that when I trade i am entering into the pool of money most of which is a figment of the banks imagination and the worst thing that would happen as a result of me winning a trade is that the bank may lose a bit of its non-existent money. I can trade with a clear conscience knowing that trading forex is not a zero-sum game and no other trader is hurt by me becoming a successful trader. It’s all digital money!!