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Frane

Where Does the Lost Money Go?

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To determine how much money is put into other traders pockets could be assumed high. It really isn't important compared to educating yourself on psychology of trading, analyzing trends, studying EAs, or news. If you study and spend the time, you might become one of those winning traders.

 

For forex traders to have the ability to trade, they need to pay these commissions or spreads to keep the brokers operating. It is like any other business that charges fees for providing a service.

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I trade FX exclusively and though my understanding of the microstructure of the currency markets is very shallow at best, I'm 99% sure my orders, due to their limited size, never reach the true (interbank) market, but remain with my broker. They are then either somehow matched with other customers' orders or maybe even my broker chooses to take the other side of my trades (thanks - lol). Truth is, I don't really care that much at this point in my "career" what my broker does with my trades, as long as my funds are safe with them.

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Your loss might be the gain of other party who might have invested wisely, remember forex trading is a very professional market where mistakes can be turned into huge losses so invest safely by taking calculated risks.

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Even I do not have an idea about, the lost money. Who earned it? Who got it? Every day so many people loss here so who got this money?

 

On a day by day basis, around 50% of all traders at a particular broker will be be profitable. The gains of the profitable traders are paid from the losses of the losing traders that day. If you dont believe me spend a week opening and closing trades at random, I guarentee around 50% of them will be profitable.

 

If you extend this to longer time periods of say for example, 3 months, the number of profitable traders declines quite significantly to around 30%

 

If you extend the time period to around a year, the number of profitable trades drops to around 5%

 

This happens for a reason. If you really want to understand why this hjappens do some research into the scaling property of randomness, Talib's book fooled by randomness is a good starting point.

 

The simple answer to your question is that the majority of money is extracted out of the system in the form of transaction fee's. Very few of the market participants has an edge, their true expectancy is zero minus transaction costs.

 

Over the short term due to statistical varience some traders will show a profit, but over longer periods of time their performance will revert to the true expectancy of their systems.

 

Maybe 0.5% of the money goes to profitable traders, but the majority of money paid into retail brokerage accounts ends up with the broker. If you do some reseach you'd be shocked to see just how much money the brokers pay in marketing costs and affiliate fee's to ensure a constant supply of fresh meet. Thats where a large chunk of the money actually goes.

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