In reality it is not really as simple as that. Take your opening example, you may buy from a counterparty and the market may rise and you take you profit. But that does not mean the counterparty has lost anything yet if he does not close his position simultaneously. He may keep his side open and the market subsequently falls and he also gets out with a profit.
The point is you do not have a specific counterparty in the market. Often, you position is counterpartied by your broker and never even reaches the real interbank market. Even if it did, your position might only be part of a bigger position and the end result is nothing to do with when you closed your own part of it.
It is also worth remembering that a lot of forex positions are not taken just to speculate on currency movements, they are, for example, to buy or sell something in other international markets.
Even when you buy foreign currency for your holiday abroad, you are not speculating on where the rate might be next week, you just want currency to enjoy your holiday!
I don’t share your view that a rich person is rich because a poor person is not and there is therefore a moral element involved. This carries the implication that there is a limited amount of wealth available in the world, that the getting of wealth is predatory and that there should ideally be be some kind of formula for sharing out all this wealth so that everyone has enough to be comfortable. This is all negative. I don’t agree with any of that.
In fact, being rich or being poor is not the key factor. It is having a high income or having a low income. People who have higher incomes are generally the more intelligent, more risk-accepting, more driven by long-term rewards, more willing to accept responsibility and often just harder-working. All these things are positive and are respected by society. You get what you strive for.
I can’t say you are wrong, but we do have limited supply of recourses you see. Thus, some currencies have more purchasing power then others because their country has more production of everyday goods to buy with that currency. This topic went from trading to world economic system NICE
@Painappuru Retail CFD Trading is a Zero-Sum Game… So technically… Your trade profit is taking funds from someone else’s trade loss…
The reality of trading Retail FX via CFD is you are really trading against your Market Maker Broker… So when you profit from a trade it comes out of your Brokers account… 99%(+) of Retail Traders positions are never placed in the InterBank Market.
Most traders/members here can’t face the fact they are actually sophisticated Gamblers… Stealing is definitely a bridge too far…
I wouldn’t say “destroyed”, maybe just extended it a bit?
Since most retail traders lose money they are, in fact, feeding funds into the market. But mostly those funds end up with their broker who is generally their counterparty rather than reaching the actual currency money markets. But would you then say that the broker is “stealing” from their clients? I don’t think so. The retail traders make their own decisions.
If the majority of retail trades actually gained then the brokers would need a different approach. But as it stands they only need to passively take the other side of the trades and manage their overall exposure.
I don’t have any first hand or in-depth knowledge of broker operations so I may be wrong here. But, either way, most retail traders are simply taking small bets on market price movements and generally lose. I wouldn’t term that stealing, just rather sad.
Yes, mistakes have to happen, while failing to learn from them is just stupidity.
My wider point is that buying in an uptrend is never a mistake, even if price falls. Sure, poor tactics could be applied, such as chasing price to enter at a high, or setting the stop-loss too tight, but a loss resulting from buying in an uptrend does not make the buy decision a mistake.
Never thought of it that way, it’s an interesting point of view.
I would say no though - I think of stealing as taking from an unwilling person. The people that are also trading are depositing their own money knowing the risk, so if they lose it, it was a risk than they chose to take versus something like having your wallet stolen.
In my opinion, no it doesn’t mean that. There are actually two issues here.
Does one trader’s gain mean another trader’s loss.
Is this stealing.
Well I think we can dismiss the second of these because all parties enter their positions voluntarily and are aware that they may lose and are willing to take that risk. This is not stealing. It is just settling gambling positions.
Regarding the first issue. As has been explained already, in most cases retail trades are counterpartied by the broker. There is no actual cash trade involved (otherwise you would have to pay and receive bank transfers to your foreign currency accounts), it is purely a view on exchange rate direction.
If this market was indeed a zero-sum game then every gain would be matched by an equal and opposite loss (ignoring fees, spreads, etc). But this is not entirely correct. As mentioned in the video that @Trendswithbenefits offered, in some cases, if the broker’s own exposure grows too large then they will hedge some of it in the interbank market. If we consider the entire interbank market then we are talking about a huge sea of currencies that are sloshing around the globe in trillions of units every day. This is then even larger if you add onto that the volumes of futures and options that are bets on rates extending out to settlement dates well into the future.
You cannot say that the interbank market is zero sum because there are multitudes of reasons why companies, institutions and individuals buy/sell currencies that have nothing to do with speculation on the future direction of exchange rates.
Let’s say an EU car maker buys components from China priced in USD. He buys the dollars with Euros at the current rate, receives the components, builds his cars and sells them at a profit. It is irrelevant what happens to the EURUSD rate after his transaction.
Equally, not all retail traders are in the minnow 100-1000 USD bracket. If a broker has a retail client that trades well, large, and consistently makes significant money then he may well hedge the positions routinely, depending on his overall exposure.
Do you actually have a moral problem with trading or is this just a hypothetical question? I wouldn’t worry about the morality of retail trading. It is generally monitored by authorities and is no different to gambling on horses, dogs, elections or any other, sometimes bizarre, forms of speculative risk taking.
If you are willing to learn something and have persistence, you can make money out of it.
The fact is that millions of people make money on the stock market every day.
The real question is: do you earn or lose?
It’s up to you.
It’s up to you.