Where does the money come from?

Hi, I've never traded forex but i'm really puzzled as to where does the money come from. I read somewhere that 25% of all trades are done for currency hedging . So 75% is trading for profit and speculation. We could basically divide traders into institutional and retail traders. I think that institutional traders are not really into losing money and let say that they are playing it safe and can make consistent 20% interest a year on their investment.
       It looks like retail investors are using some kind automatic, back testing software, that helps them make consistent profit .
There are many softwares here reviewed where u can have 7% or more in monthly returns, and some of them have been consistently making money for many years. I think that many new traders lose their money at the beginning, and then they do extensive research and end up using a software that find the trades for them . So once you find the successful software u should be making long term monthly profits and compounding the interest on every trade. Let say you lose $10,000 your first year, you either never come back or you start using a software and start over once you save $10,000. But with a software u are able to make let say 7% a month on average for many many years. So where does the money for opposite trades come from ?
    
      Your account is compounding exponentially , it means that new money must be coming in with exponential rate as well. Lets assume that everybody who comes back to Forex after losing their first investment is are able to grow their account let say 7% a month . If we pool money from all the traders who are using successful software method for trading we will have pretty large number . If we give it enough time ,let say 20-30 years, these traders will own all the money in the world. Why aren't they influencing liquidity in trading to such extent that it takes really long time to execute the trades ,as there are no more buyers and sellers.

    
   
     Let say 7% a month minus 35% income tax a year , we have 80% interest a year. In 30 years that's 45517159 times the initial investment. So starting with $10,000,000 you would probably owe all the money in the world. It almost looks like, that in order for forex to work there must be equal amount of people who have loses that grow exponentially. So sooner or later, all the winners must give money back to forex losers in order for forex to continue to work. So even if you have a successful trading software or system , it should start to lose money sooner or later because you would own all the money in the world . And loses should appear with such a speed that no stop loss should help you .


I apologize in advanced for my limiting knowledge of forex, and question asked may just be common knowledge between the experienced traders. I hope someone can clear this out and tell me, how can someone produce consistent long term profit in forex and where all the new money is coming from ?

Thank you,
Best regards.
Lou,

Well ,
Only about 5% off trader make profit , so money come from other 95% .
Just imagine 95 people give money to 5 people .
Making money in forex is not easy for long term .
Just look at the forum bellowing creative 2 years aging looking for traders with 2 years profit record but just found may be 1 or 2 over thousands of traders summit the records .

Agree with above poster.. Only I read that only 2% make it and the other 98% pump new money in all the time. The idea of becoming armchair millionaires by spending a couple of minutes in front of screens is very popular, and always promoted by vendors of software, forex books or courses...Of course many fall into that trap, but only realize it was a trap after they bought/funded whatever and lost all.

no software could trade you a net positive consistently for multiple years on end. It might work for a couple years, but not indefinitely.
The reason you ask this question is because you are thinking of to many things as constants. The only constant is the fact that it is a zero sum game. For every buyer, there is a seller, for every loser , there is a winner. .....
The money comes from those submitting it, and in forex, like any other instrument, there isn't always just a trader entering the market for a gain.
hopefully this helps

There's a constant influx of new people on the market, newbies looking to make a quick buck, not knowing what they're doing and losing their accounts. That said, I am sure that the big players also make mistakes sometimes and lose (a lot) of money.

There's an interesting article on DailyFx,regarding Winning and Losing trades,its compiled from FXCM data on 43 million real trades.
Its a first rule in trading to keep losses small and let winning trades run as much as possible,everyone knows this already,you can afford to be wrong more than 50% of the time,its a habit one has to learn to cut out of losses quickly.If new traders can stick to this and employ a good strategy they have a better chance of making profits.There are many figures on % of losers/winners obviously more losers,its a great business model with 5% downside risk if we apply the 5/95% figures,In the EU spread betting for retail isn't taxed that's because its a huge money making machine for companies.

forex and where all the new money is coming from ?

coming from other traders that trade in the opposite direction

lou111 posted:
     Let say 7% a month minus 35% income tax a year , we have 80% interest a year. In 30 years that's 45517159 times the initial investment. So starting with $10,000,000 you would probably owe all the money in the world.

At a time well before that. You buying or selling will be well equal to a interest cut. You will move the market against you. I even found it harder to make short term profits using say 20-30 lots on minor currencies since you tend to move the market. Especially outside their trading sessions.

If you intend to trade with say a billion. You will need a whole different strategy.

lou111 posted:
Hi, I've never traded forex but i'm really puzzled as to where does the money come from. I read somewhere that 25% of all trades are done for currency hedging . So 75% is trading for profit and speculation. We could basically divide traders into institutional and retail traders. I think that institutional traders are not really into losing money and let say that they are playing it safe and can make consistent 20% interest a year on their investment.
       It looks like retail investors are using some kind automatic, back testing software, that helps them make consistent profit .
There are many softwares here reviewed where u can have 7% or more in monthly returns, and some of them have been consistently making money for many years. I think that many new traders lose their money at the beginning, and then they do extensive research and end up using a software that find the trades for them . So once you find the successful software u should be making long term monthly profits and compounding the interest on every trade. Let say you lose $10,000 your first year, you either never come back or you start using a software and start over once you save $10,000. But with a software u are able to make let say 7% a month on average for many many years. So where does the money for opposite trades come from ?
    
      Your account is compounding exponentially , it means that new money must be coming in with exponential rate as well. Lets assume that everybody who comes back to Forex after losing their first investment is are able to grow their account let say 7% a month . If we pool money from all the traders who are using successful software method for trading we will have pretty large number . If we give it enough time ,let say 20-30 years, these traders will own all the money in the world. Why aren't they influencing liquidity in trading to such extent that it takes really long time to execute the trades ,as there are no more buyers and sellers.

    
   
     Let say 7% a month minus 35% income tax a year , we have 80% interest a year. In 30 years that's 45517159 times the initial investment. So starting with $10,000,000 you would probably owe all the money in the world. It almost looks like, that in order for forex to work there must be equal amount of people who have loses that grow exponentially. So sooner or later, all the winners must give money back to forex losers in order for forex to continue to work. So even if you have a successful trading software or system , it should start to lose money sooner or later because you would own all the money in the world . And loses should appear with such a speed that no stop loss should help you .


I apologize in advanced for my limiting knowledge of forex, and question asked may just be common knowledge between the experienced traders. I hope someone can clear this out and tell me, how can someone produce consistent long term profit in forex and where all the new money is coming from ?

Thank you,
Best regards.
Lou,

Money came from government printers. By printing the government does devaluate the money. By devaluating the money the government does decrease the value of debt to creditors. And also decrease the wealth of people owning this printed money.

togr posted:
Money came from government printers. By printing the government does devaluate the money. By devaluating the money the government does decrease the value of debt to creditors. And also decrease the wealth of people owning this printed money.

We only have to GAIN in higher rate, than they print money 😄

StoneHeart posted:

togr posted:
Money came from government printers. By printing the government does devaluate the money. By devaluating the money the government does decrease the value of debt to creditors. And also decrease the wealth of people owning this printed money.

We only have to GAIN in higher rate, than they print money 😄

would be kind of breathtaking 😎😎

StoneHeart posted:

togr posted:
Money came from government printers. By printing the government does devaluate the money. By devaluating the money the government does decrease the value of debt to creditors. And also decrease the wealth of people owning this printed money.

We only have to GAIN in higher rate, than they print money 😄

Yes gain has to be better than inflation + currency conversion rate + server cost and leave enough to pay for living :)

snapdragon1970 posted:
There's an interesting article on DailyFx,regarding Winning and Losing trades,its compiled from FXCM data on 43 million real trades.
Its a first rule in trading to keep losses small and let winning trades run as much as possible,everyone knows this already,you can afford to be wrong more than 50% of the time,its a habit one has to learn to cut out of losses quickly.If new traders can stick to this and employ a good strategy they have a better chance of making profits.There are many figures on % of losers/winners obviously more losers,its a great business model with 5% downside risk if we apply the 5/95% figures,In the EU spread betting for retail isn't taxed that's because its a huge money making machine for companies.

That article from dailyfx regarding winning and losing trades is really interesting. Also the article at dailyfx that discusses leverage. The lower the leverage and the larger the account balance the higher chance of turning a profit one has ,over the long period of time ,if they could cut the losses quick . I can understand little better now why it is so easy for new and experienced traders to lose money so quickly . The psychological aspect discussed at that article is really interesting , but quite difficult to adhere too,even if you know about it, especially after you lost 50% of your account trying to get just couple of more successful trades,which could easily cause you to increase your leverage in your already underfunded account.

I'm not sure if the links to article are allowed, but you can google ' DailyFx,regarding Winning and Losing trades' and it should be the first result.