Zero-Sum Game
A market situation where one participant's gain equals another's loss, with total gains minus losses equaling zero.
Definition
In a zero-sum game, the total gains of all participants exactly equal the total losses. Forex and derivatives trading are often considered zero-sum: for every profitable trade, there's a losing counterparty. However, transaction costs make it slightly negative-sum.
How It Works
- You profit $100 on EUR/USD long
- Someone else lost $100 on the other side
- Total: +$100 - $100 = $0
- Minus spreads/commissions = negative-sum
Trading Tips
1
Your profits come from other traders' losses
2
Brokers/exchanges profit from all trades
3
Edge and discipline determine long-term success
Related Terms
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