Forex Zero Sum-Total FX Myth

Hi there. I've been a retail FX trader now for the better part of 3 years - sad to say though, I've been in and out of losing several FX trading accounts the whole time.

Nevertheless my general approach to getting successful at FX trading is to gain the deepest of perspectives of how trading works in its true dynamics.

An illustration of this is the point of discussion on this thread: that having examined the facts closely, I have a contrary belief to the popular FX maxim that FX trading has a zero sum-total in net profits/losses outcomes.

IT IS A FALACY THAT FOREX TRADING ADDS UP TO ZERO IN SUM-TOTAL OF NET PROFITS OF ALL TRADERS

Here are my clear arguments:

1) Lets for argument's sake, assume the total population of FX traders (institutional traders and retail traders combined) to be the arbitrary figure of 1000.

2) Next, let us assume that at the same moment in time each and every one of the 1000 enter their respective trades.

3) Granted, the very next second all the trades are in, will reflect a zero sum-total in terms of net profits and losses, BUT ONLY INSOFAR AS THE TRADES ARE STILL ALL OPEN TRADES AND THIS REMAINS SO WHEN NO SINGLE TRADER AMONGST THE 1000 HAS YET CLOSED HIS OPEN TRADE.

4) Next, consider for the sake of illustrating my point, that the 1000 total traders are composed of 950 retail traders and 50 institutional traders, and that the 950 retail traders all close-out their trades at the same moment in time with all being with profit.

5) This would mean that at least some of the 50 institutional traders were with open, losing trades at the moment the 950 retail traders closed-out with profit.

6) However, markets may change direction later such that the erstwhile losing trades of those institutional traders become winning trades that can close-out with profit too.

7) For point 6) to occur would of course mean that some amongst the assumed net 1000 population of all traders went for a second round entry of new trades, and thus continues the cycle.

8) Therefore theoretically, all trades can close-out profitably. In reality though, what we see at the end of each trading day is a net PROFIT or a net LOSS of closed trades.

9) To be clear, a zero sum-total of profits/losses does occur insofar as the net OPEN and CLOSED trades combined are considered.

10) Point 9) above however underscores the messiness of the zero sum-total maxim: whoever amongst we traders ever considers any trade a WIN or a LOSS from the moment the trade is open before the very end.

Source.