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If i earn money in forex does this anyone from otherside loses money like in stock market. In stock market when we earn someone lose. And if we lose, to whom does that money go?

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    In stock market it is not at all necessary for anyone to lose for you to gain. It is not a zero-sum game, there's always new money flowing into the system.
    – littleadv
    May 27, 2022 at 7:28
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    Anyone who buys high and sells low loses money, just like anyone who buys low and sells high makes money. You don't know whether the person you're interacting with is making a profit or loss (or neither) on the transaction.
    – AakashM
    May 27, 2022 at 8:58
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    Between spread, slippage, and swap fees, it looks like it's the brokers winning and the traders losing. May 27, 2022 at 10:22
  • ‘In stock market when we earn someone lose.’ That’s not true
    – quid
    May 28, 2022 at 15:14

2 Answers 2

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Long story short, yes it is a zero sum game. for every winner there is a loser.

The forex market works in terms of pair. If you are buying one, you will be selling the other. For example, if you are buying EUR, you will be selling USDs in your account (presumably that is the base currency in your account.).

Until the recent years, the forex market has been predominantly transacted by the big boys, ie corporations with actual interest in moving money around. For example, Microsoft may want to move USDs into EURs for a factory to be built. They will very much like to have the best possible price, however, making a profit is not their objective here.

Compared to a proprietary trader, where the trader feels that the EUR is going up against the USD and wants to buy EUR going into the news event. Now when trader executes, the deal he will likely do it through a brokerage of sorts, in this instance, he needs to pay the spread for the transaction from the broker while the broker got from the market. So lets say that euro is traded at $10.00 broker buys it from his provider (usually a bank or another brokerge) for $9.00 and immediately sells trader who bought it at $10.00. (broker earns $1.00)

1 day later, the EUR indeed rise to $15.00 and trader says thats good enough, I am done and wants to sell it away, maybe to the same broker, maybe not. Anyway, he manage to find a seller who wants to buy it from him at $14.00 after some bargaining..

As forex is a decentralised market, you almost never really know whos at the end of the line, so after the broker, there may be a bank behind that who has a larger book and is balancing(or overweight in EURs!... maybe BMW wants to build a factory in USD and sold huge to the bank who bought it cheap !) so his average was buy at $6.00 so he has already made $3 when he sold to the broker .. and so on and so forth. There is alot of depth and permutations in variations of "whos winning, whos losing" we just hope we see more green than red at the end of the day.

Hope that helps..

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If you are buying then someone is selling. If you are selling then someone is buying.

If you bought low then someone else sold low. If you sold high then someone else bought high. They don't have to be the same person.

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  • If you bought “low” someone selling may have bought lowER…
    – quid
    May 28, 2022 at 15:13
  • @quid If the current price is "low" and you are buying, then someone else is selling "low". It's irrelevant they may have bought lower in the past.
    – user253751
    May 28, 2022 at 17:10
  • The question essentially asserts that if you’re selling for a gain then someone is necessarily selling for a loss which isn’t true. Low/high is either relative to the past or relative to your entry price. Either way, there is no way of knowing whether your counterparty is gaining or losing or selling short or whatever, which is maybe what you’re trying to say. Your answer would benefit greatly from some context.
    – quid
    May 28, 2022 at 22:28
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    @quid As I said, they don't have to be the same person. In aggregate, everyone else is making your gain as a loss.
    – user253751
    May 29, 2022 at 11:05
  • That’s the claim the question is making which isn’t true.
    – quid
    May 29, 2022 at 15:20

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