foreign exchange market

foreign exchange market is a zero sum game in which there are many experienced well-capitalized

professional traders (e.g. working for banks) who can devote their attentions full time to trading. An

inexperienced retail trader will have a significant information disadvantage compared to these

traders.

Retail traders are - almost by definition - undercapitalized. Thus they are subject to the problem of

Gambler's Ruin. In a fair game (one with no information advantages) between two players that

continues until one trader goes bankrupt, the player with the lower amount of capital has a higher

probability of going bankrupt first. Since the retail speculator is effectively playing against the

market as a whole - which has nearly infinite capital - he will almost certainly go bankrupt.

The retail trader always pays the bid/ask spread which makes his odds of winning less than those of

a fair game. Additional costs may include margin interest, or if a spot position is kept open for

more than one day the trade must be "resettled" each day, each time costing the full bid/ask

spread.