I think I'm on a very questioning mode on everything about trading. You've read books, plenty of them, but they didn't help your bottom line. So logic says, the books just might be wrong. And I think we need to question everything to find out the truth ourselves. So here's another common teaching that I partially don't really agree with.
"For someone to win/lose, someone else has to lose/win."
That's literally true. Say there are 4 little people. And for the sake of originality, let's call them A, B, C, and D.
A opens a 1 lot long on EU. For this to happen, the banks must match it up with someone who is willing to sell 1 lot at the exact same time. Say B happens to be the willing victim. Then price goes up by 20 pips. A is now on +20 long, and B is on -20 short.
Now A wants to close the 1 lot position by going short on EU. For this to happen, the banks must again match it up with someone who is willing to buy 1 lot at the exact same time. Say B is not willing to close the position. So A is matched with C who now is on 1 lot long EU. But even if B is willing to close the position, considering this is a global market, B is very unlikely to be matched up again with A.
At this stage, A is out of the market with profit, B is on -20 short, C is on 0 long. Then say price goes down by 20 pips. B is out for a break even trade and get matched by D who is now 1 lot short on EU.
At this stage, A is out of the market with profit, B is on break even and out of the market, C is on -20 long, D is on 0 short. Then say price goes up again by 20 pips. C is out for break even, D is on -20 short.
So the bottom line is, A is +20, B is 0, C is 0, D is -20. Ok I get it... Maybe. I don't know how these 20 pips movement are made in the first place. There has to be winners and losers too.
Anyway, the part that I don't agree or understand is how this logic is supposed to explain the large majority of traders who are losing money.
How can this statement explain the transfer of wealth from the mass majority to an elite few?
For example, if most traders at one time (not only retail traders, but global whole traders), are bullish, then they will push price up and all the bearish traders will suffer a loss. But the loss of the bearish traders are not much because there are only few of them, and the profit to the bullish traders won't be much either as it will be spread out as there are many of them. So based on this theory, no one in particular should make a killing in this case, or in any other case, because that's how trend develops. IF..., this statement is true. But reality says otherwise.
My own suspicion is that there is a mechanism where price can be moved without equity commitment and one collective very powerful entity controls such mechanism. In that way, the explanation of majority traders losing money becomes clear.
"For someone to win/lose, someone else has to lose/win."
That's literally true. Say there are 4 little people. And for the sake of originality, let's call them A, B, C, and D.
A opens a 1 lot long on EU. For this to happen, the banks must match it up with someone who is willing to sell 1 lot at the exact same time. Say B happens to be the willing victim. Then price goes up by 20 pips. A is now on +20 long, and B is on -20 short.
Now A wants to close the 1 lot position by going short on EU. For this to happen, the banks must again match it up with someone who is willing to buy 1 lot at the exact same time. Say B is not willing to close the position. So A is matched with C who now is on 1 lot long EU. But even if B is willing to close the position, considering this is a global market, B is very unlikely to be matched up again with A.
At this stage, A is out of the market with profit, B is on -20 short, C is on 0 long. Then say price goes down by 20 pips. B is out for a break even trade and get matched by D who is now 1 lot short on EU.
At this stage, A is out of the market with profit, B is on break even and out of the market, C is on -20 long, D is on 0 short. Then say price goes up again by 20 pips. C is out for break even, D is on -20 short.
So the bottom line is, A is +20, B is 0, C is 0, D is -20. Ok I get it... Maybe. I don't know how these 20 pips movement are made in the first place. There has to be winners and losers too.
Anyway, the part that I don't agree or understand is how this logic is supposed to explain the large majority of traders who are losing money.
How can this statement explain the transfer of wealth from the mass majority to an elite few?
For example, if most traders at one time (not only retail traders, but global whole traders), are bullish, then they will push price up and all the bearish traders will suffer a loss. But the loss of the bearish traders are not much because there are only few of them, and the profit to the bullish traders won't be much either as it will be spread out as there are many of them. So based on this theory, no one in particular should make a killing in this case, or in any other case, because that's how trend develops. IF..., this statement is true. But reality says otherwise.
My own suspicion is that there is a mechanism where price can be moved without equity commitment and one collective very powerful entity controls such mechanism. In that way, the explanation of majority traders losing money becomes clear.