Is Someone Losing When I'm Winning?

This is a great question asked by day traders all the time and even those who don't day trade. Someone said if you get serious in trading you need to know that when you win it's only at the expense of someone else. Is this true? Isn't Forex just buying and selling the currency, that doesn't have to involve someone on the other end, does it? This was most likely said by someone who either A, lost a lot and wants to say the market is evil or B, likes taking money and is just informing you of what they believe to be the reality. Or, maybe they are just ignorant as to how the market works. Could someone lose when you win? Of course, welcome to the world of competition and finance! However, it is no more wrong for you to be profitable and them not-profitable, than it is for your favorite sports team to beat another sports team on Sunday night football. To view image click HERE 43k image1 The winning team makes more money if they win, more points per touchdown, etc. On the other team, the losing team, the coach may get fired, players get traded or worse yet, cut, etc. Tragically, some players will get injured during the game and will never be able to play again. All participants, fans and viewers know this going into the game at the outset. There is nothing unfair about it. If you are not willing to lose don't play. While it may be more brutal than other sports, football is not the only professional sport to endure all of these risks. No risk no reward. This can also be said for business and finance, starting with the lemonade stand on the corner managed by 8-year-olds. To view image click HERE 44k image2 That being said.... “Someone has to lose for you to win in trading,” is a false statement and a "myth". If you are buying, someone else is selling. If you sell, someone else is buying. There is always someone on the other side of a trade. But to think you bought and sold to the same person every time on a par for par basis, is pretty ludicrous. The universe is much bigger than two people and so is the world of trading. Here are a few examples of why that statement is false.... CORN A farmer grows corn. (Instead of Corn, this example could be Exxon pumps oil, gold company mines gold, whatever. It still applies.) Farmer sells his corn on the futures market to lock in his profit. The farmer has now profited from his expense, labor and sale of corn. You buy the corn future from him. You sell it at a higher price to a company like Kellogg who is now the buyer. You are now profitable. Kellogg's makes Corn Flakes cereal. They sell it to the grocery store at a higher price and they make a profit. The grocery store sells it to you, the futures day trader, or the farmer who grew the corn, the employee who works for Kellogg's, and the checkout clerk at the store or whomever else at a higher price and now the grocery store makes a profit. Everyone who purchased the cereal gets to eat and nourish their bodies and live another day and that can be considered as profitable. So who lost in that scenario? No one lost. STOCK The stock company issues shares to raise capital. They receive income and the company gets a big launch. You buy IPO shares at $2.00 a share. You sell them at $5.00 a share publicly and you profit. Someone buys them publicly from you at $5.00 a share and then turns around and sells them at $20.00 a share. Someone else buys them at $20.00 and collects dividends. Over the next decade that person lets the dividends accrue. The accruals now cover the value of the stock. The next ten years accruals collect income for grandkids. So that person and their grandkids profit. The original company ends up buying back stock twenty years later at say $15.00 a share, which is ok because more than that has been made in dividends. The company now has more ownership and goes private after many years of success as a public company. The company keeps more of its profits no longer having to pay out dividends. Who lost in that scenario? No one lost. OPTIONS One guy buys GBP/USD at one price and sells to you at a higher price and the guy profits. When you buy, you sell two times the amount of Nadex spreads you need. The market drops against you causing your Nadex spreads to profit more than your GBP/USD loses. You close your spreads and your GBP/USD trades for a net profit. The Nadex spreads you sold were bought by someone else who also happened to sell some Nadex OTM binaries when the market dropped and their binaries covered their loss. But then someone bought those Nadex binaries that the other person profited on. Yes, that was the market maker though, and they have a book laying off risk and delta neutralizing across dozens of markets and exchanges worldwide. They are fine, as they make enough across all trades in bid/offer to cover the losses on other trades. So yes, they lost eventually on the binary trade, but they made money overall on the bid/offer spreads from all the trades to cover the few losses they took being slightly off on their delta neutralizing. And, you had nothing to do with the person that lost, being the market maker who really did not lose in the end. Who lost in that scenario? No one lost. Will it always work out this way? No, there will definitely be casualties and losses. The lesson to learn is that losses are real. They do exist. Make sure you account for them and expect them. Make sure you manage your risk. Don't become a casualty of the market. You have enough to worry about with your own risk; don't take on the worries of other people's risk. That is like trying to play football but trying not to tackle the quarterback too hard, as you would hate for him to twist an ankle. You don't really want to hurt the quarterback but you came to stop him from making any progress on the field. He came to make progress against your team. Stuff happens. You came to play, he came to play. So put on your big boy/girl pants and let's trade! If you want to learn more about Nadex options and day trading, go to www.apexinvesting.com, a service provided by Darrell Martin. Apex Investing Institute offers free education, and free access to the Nadex Binary and Spread Scanner Analyzers. Member traders are invited to trade in the rooms, take advantage of trade signal services, have key indicators and access the Apex Forum. The forum content is updated daily and includes over 7000 members. In a supportive learning community of seasoned as well as up and coming traders, traders of all levels learn how to trade Nadex binaries and spreads in depth, as well as futures, forex, stock and options, and gain an edge for successful trading overall.