Zero-Sum Game
Market Microstructure glossary · Market Microstructure Fundamentals
Definition
A situation where the total gains and losses of all participants sum to zero. Trading is zero-sum before costs and negative-sum after costs.
Zero-Sum Game in plain English
A zero-sum game is any situation where one person's gain is exactly someone else's loss, so if you add up everybody's wins and losses the total is zero — nothing new is created, the pot just moves around the table like chips in poker. Trading is like this before costs: for every trader who profits on a bet, whoever took the other side lost the same amount. But once you subtract real-world costs — the bid–ask spread, broker fees, taxes — money leaks out of the group to middlemen, so the players as a whole end up with less than they started. That makes real trading negative-sum: the average participant loses a little just from friction, which is why beating the market after costs is genuinely hard.
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