A zero-sum game is defined as a situation or interaction in which one participant’s gains result only from another’s equivalent losses.  In other words, nothing is created.  Winners’ gains are perfectly offset by losers’ losses.
Futures and currency markets are often described as zero sum games, and it’s true, if we’re talking about the sum of profits and losses.  From the perspective of traders focusing on their profit and loss statements, these markets are actually negative sum games due to transaction costs imposed by brokers.  The market participants are like the players in a casino poker game, where money slowly but surely is raked away by the house. 

After I read The Science of Getting Rich by Wallace Wattles,  I struggled with whether or not it was a worthwhile effort to develop a trading system for the forex market.  In Wallace Wattles’ terminology, participating and winning in a zero sum game would be getting rich by competition, not by creation.  He warns his readers that wealth gained from competitive pursuits is fleeting, whereas wealth gained from creation serves the highest good of all.

I have found that a perspective shift here is quite useful.  This following is an adaptation of the idea put forth by Ed Seykota that everybody gets what they want from the markets.  Seykota makes us aware that traders often have emotional motives for trading, and are not profit maximizers.  Even if this were not the case, and every speculator was a rational profit maximizer, we still need to realize that the forex and futures markets are not purely inhabited by speculators.

Forex in particular is inhabited by speculators (profit seeking risk takers), hedgers (those who attempt to reduce risk), and central banks (wildcard with DEEP pockets).
The transfer of risk in organized zero sum markets facilitates growth in positive sum flow markets.  For example, an airline can hedge in futures markets to put a collar around the price they will pay per barrel of oil.  Speculators absorb the risk by taking the other side of the trade, and the airline can more confidently set ticket prices that will result in profits, keeping the airline in business and keeping all of it’s employees’ paychecks coming.

Risk transfer is not accounted for in the game theory zero sum equation, but it is undeniably valuable in the real world.  On an even more basic level, remember that each transaction in the market involves a willing buyer and a willer seller, so indeed, every time I make a trade, everybody is getting what they want, and I might just be greasing the wheels of the economy at the same time.

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