Just curious, because traders' profits come from banks. The world as a whole is a bucket shop.
Can a grid trader survive? 54 replies
Why and how Win-Win in Forex is possible 56 replies
Can the Euro survive? 99 replies
New Year 2010 - How long can I survive with 50 dollars? 8 replies
Win 2 trades out of 10 and win 180 pips 8 replies
DislikedJust curious, because traders' profits come from banks. The world as a whole is a bucket shop.Ignored
DislikedAll traders will not, because they can not, win (simultaneously). I should preface this by saying this statement holds true in spot FX and futures/options. This does not include stock markets.
This reason is simple once you grasp it, but it can take a while to wrap your mind around. In FX markets, there is always a counter position (or contra-position) in play opposite every other position. In order for you to enter a long position, somebody else must enter into a short position. There are no "naked" or independent positions. This means that for every dollar gained, there is an equal dollar lost. Ergo, the total dollars in play will remain the same provided the number of positions is static (unlikely). The dollars will just change hands.
This is unlike stock markets in which everyone can win if everyone buys, holds, and stock prices all appreciate. This is commonly known as a bull market. All of the "long" positions enjoy the appreciation of stock prices and everyone holding these stocks sees in increase in their net worth. No one is losing since there are no contra-positions. In other words, if you buy a share of stock, nobody had to short you that stock. Your long position is independent of all other parties, unlike FX where somebody must be short when you are long.
Traders profits do not always come from banks. They always come from the trading accounts of the positions which have lost value and flow to the trading accounts that have appreciated in value. Money just changes hands in FX (and futures) markets. Banks make money by charging a spread or commission or both. However, banks may have taken contra-positions and lost - their value decreases. But usually the big players, including banks, come out on top. When was the last time you heard of a multitude of small traders taking down a gigantic bank's trading fortunes because of their collective market prowess? This is an unlikely event in deed.
As for your last comment, about the entire world being a bucket shop, I do not know how to appropriately respond to that comment. I think it is short-sighted, over-simplified, and due to a lack of market knowledge. For the most part, markets in developed nations are fair and orderly in the sense that liquidity problems are rare (not fair in the sense that you have a "fair" chance of making profits, because you don't - information is assymetrical). Seldom do market makers outside of retail FX need to play games with their clients' accounts. In many countries, this is blatantly illegal.
-=DAVE=-Ignored
DislikedNice post Dave
In short words, the majority of the retail players of any commodity markets are used as liquidity and profit providers for the profiting and hedging players.
What happen if 30%, 50% or 70% percent of the retail traders take the "right position" at any given moment and pair. And the banks are the counter parties of those positions thus creating an imbalance in their orderflow and inventories. Answer: they move the market in order to trigger the majority of their stops. A "similar" case happens in a smaller scale with any given deal desk broker and their clients.
Remember that all retail traders are just 2% of the total volume of the spot forex and each of the top banks of the world represent 2%-19% percent of the total volume. Just imagine a sardine or a shoal of sardines trying to overtake barracudas, sharks and orcas. Banks and large players will never lose to retail tradersIgnored
DislikedThis reason is simple once you grasp it, but it can take a while to wrap your mind around. In FX markets, there is always a counter position (or contra-position) in play opposite every other position. In order for you to enter a long position, somebody else must enter into a short position. There are no "naked" or independent positions. This means that for every dollar gained, there is an equal dollar lost. Ergo, the total dollars in play will remain the same provided the number of positions is static (unlikely). The dollars will just change hands.
-=DAVE=-Ignored
DislikedNope, if every long = short then price woun't move...simple demand and supply law
On stock not everyone wins, what happens if you buy on the top?
If I buy, in spot fx, at 200 and I close it at 202, i win 2 pips, and if you buy it at 202 and then goes to 204, you win 2 pips too. See, we are both winners...Ignored
DislikedYou are missing the point. In order for there to be a transaction, somebody has to enter long, and somebody else has to enter short. This has nothing to do with price movement. Price moves because the two parties agree to buy/sell at a different price than the previous trade.
I do not know how to make this any simpler.
I did not say everyone is guaranteed to win in stocks. I said everyone CAN win because there are no contra-positions. There is no requirement that somebody takes the opposite side of your transaction. Once you buy from somebody, that seller is out of the game. Not so in FX. When you buy Euros, somebody had to short them to you - both of your positions are intertwined and someone will lose pips while the other side will win those pips. For every dollar gained there is an equal dollar lost.
Now let's analyze your example. If you buy at 200 in spot FX, guess what? Somebody had to short that currency to you at 200! They are still in the game! The seller does not get to freely walk away. Now you close out at 202. You made 2 and the short position lost 2, net is zero (-2 + 2 = 0).
When you close out, you really sell to some other party and this offsets your position - you're now flat. But, if price goes to 204, the original short (at 200) is now down 4, and the person you sold to (who went long at 202) has made 2. The net pips (dollars) is still zero (-4 + 2 + 2 = 0).
Yes, the long positions would have won in this example. The contra-positions would have lost - once again the net dollars gained and lost is always zero in retail FX.
Your example would hold true in the stock market. I buy at 200 and price goes to 202. I've made 2! No one lost because I simply bought what somebody else had in their possession that I exchanged for dollars - I paid them 200 for their shares. When I sell at 202 to somebody else, and price goes to 204, that other person made 2. Yes, we're both winners and there are no losers (unless you count the opportunity cost of selling at 202 when price went to 204). This is only true in stock markets. Additionally, when trading on margin in the stock market in order to short stocks, things begin to look a lot more like the workings of retail FX and futures since a short sale REQUIRES a long position and now the two sides are intertwined in which only one side will win.
Hopefully this helps.
-=DAVE=-Ignored
DislikedIn my humble opinion, there is volume limited for buy and sell for each pair. And the changing in volume is faster than price changing. Only bank traders know the volume. For online trader like us may not know. When the buy volume is getting lower and lower, there will be increase in sell volume. And at this time if there is sudden sell big orders, the price will fall hard vice versa.
hope anyone can clarify my opinion.Ignored
QuoteDislikedThe laws of supply and demand state that the equilibrium market price and quantity of a commodity is at the intersection of consumer demand and producer supply. Here quantity supplied equals quantity demanded (as in the enlargeable Figure), that is, equilibrium. Equilibrium implies that price and quantity will remain there if it begins there. If the price for a good is below equilibrium, consumers demand more of the good than producers are prepared to supply. This defines a shortage of the good. A shortage results in the price being bid up. Producers will increase the price until it reaches equilibrium. Conversely, if the price for a good is above equilibrium, there is a surplus of the good. Producers are motivated to eliminate the surplus by lowering the price. The price falls until it reaches equilibrium.
Dislikedi don't wan't to enter in an argue here, youre getting it all wrong...
as every asset, dolar, euro and every other currency's price moves after the demand and suply law. it's the simplest economic law
from wikipedia
:same thing happens to currencies, and all goods.
In order to clarify this, here is the link If you still don't get it, then buy an Economy 101 book, or something like this
Hopefully this helpsIgnored
DislikedThe difference is only a difference if you treat money special, which obviously is impossible when trading currencies.
You're shorting the dollar when you're buying GOOG/$ or AAPL/$, just as you're shorting the dollar when you're buying EURO/$. There's no free lunch.Ignored
DislikedSemar,
Again, this is not what I am trying to say!! I'm saying that for somebody to enter the market long, another party has to enter the market short AT THE SAME PRICE. This does not mean that prices will remain static. Prices will move because EACH buyer/seller pair agrees to a different price than was agreed upon prevously by a different buyer/seller pair.Ignored
DislikedExactly from what i underline above. it doesn't need someone to enter short, someone just need to close it's long. (closing a long is done by an "exit" short)
Hope now I made my self more explicitIgnored
DislikedExactly from what i underline above. it doesn't need someone to enter short, someone just need to close it's long. (closing a long is done by an "exit" short)
Hope now I made my self more explicitIgnored
DislikedIn this business, despite it's zero-sum nature, there are win-win situations.Ignored