The Zero Sum Game


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An animated description of how the currency market works compared to the stock market, and how to use the principle of the "Zero Sum Game" to make money trading forex.

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  • Only wanted this to be a 5 min video but it turned out to be much longer
  • Talk about returns here. Successful Tas might already be doing this without knowing it
  • Graph of GBP vs. IR differential. 2. Breakout from range. 3. H/S. All information is already factored in. So this is wehre we start thinking outside the box 4. Fourier addition
  • Currencies may increase in rate due to country becoming more valuable, but not too much, because it could hurt the country.
  • The truth: there’s so much randomness and so many different opinions and motives that you can’t predict. However, you do know when the market has become increasingly one sided. THIS WILL EVENTUALLY MAKE SENSE
  • This happens on every time frame
  • This happens on every time frame
  • This happens on every time frame
  • The Zero Sum Game

    1. 1. “The Zero Sum Game”: What you must understand in order to make money in the long run <br />&quot;I don&apos;t play the game by a certain set of rules; I look for changes in the rules of the game.“ — George Soros<br />
    2. 2. How to win without relying on luck<br />
    3. 3. Dispelling the myth of predictability<br />Let’s take 3 cases:<br />The Fundamental trader<br />The Technical momentum/trend trader (indicators)<br />The Technical value trader (head/shoulders pattern) <br />We can deal with randomness by putting it into context. Consider: <br /><ul><li>Fundamentals
    4. 4. Sentiment
    5. 5. Order flow</li></li></ul><li>The zero sum game: illustrated<br />FX: Zero Sum Game<br />Stock Market: Net Wealth Game<br />Consumer<br />Central Bank<br />Investment Bank<br />Pension Fund<br />Product<br />Resources<br />Company<br />Company 2<br />Labor<br />Institutional Investors<br />Company 1<br />Investors<br />
    6. 6. Rules of the game<br />Rule #1: The process of price discovery is chaotic and thus unpredictable.<br />Rule #2: The market’s job is to confuse the most participants<br />Rule #3: No wealth is created or destroyed—only transferred. <br />Rule #4: People don’t trade the market. They trade their opinions of the market<br />Rule #5: The profitable players in the market are a minority (by definition). The way they win is by knowing the hand (position) of the majority<br />
    7. 7. Thinking in the present<br />Value vs. Momentum<br /><ul><li>Value buyers look into the future, and momentum buyers look at what just happened in the past: Unfortunately both are using the past to predict the future
    8. 8. Hint: Think in between the two, and that is the present.
    9. 9. Let someone else catch falling knives
    10. 10. The “secret” formula:</li></ul>IMBALANCE + SENTIMENT CHANGE = PROFIT<br />
    11. 11. Thinking in the present<br />IMBALANCE + SENTIMENT CHANGE = PROFIT<br />An imbalance happens when the market as a whole starts to reach a consensus<br />A sentiment change can be realized when price starts responding to events and technical levels differently (also when media focuses on something else)<br />A profit is realized by letting someone else discover where the bottom is, catching the meat of the move, and limiting risk while also accounting for randomness<br />
    12. 12. Example<br />
    13. 13. Please send your questions to me!<br /><br />Thinking outside the box to profit from forex<br />