It is said that fx trading is a zero-sum game: for someone to win, someone must lose. *
Every forex trade has two sides: one who buys and one who sells. The trader who buys expects the price to rise. The trader who sells, expects the price to fall. Only one can be right.
If every winner were paired with a loser, it should mean that winners and losers should match up 50/50, but that is not what happens.
The additional factor that “skews ” the numbers is how much the winner wins and how much the loser loses, as they go on and exit their trades. Someone else in the market will match those exit trades, but it is virtually impossible that the two traders will be matched again.
It is not that important that every trade has a winner and a loser. More important is that the difference between the traders are not so much dictated by who wins and who loses individual trades, but rather how many you lose and how many you win over a range of trades. Coupled with the number of winners and losers, the important aspect is how much you win and how much you lose. Again, not in money terms, but in pips.
Read this research which illustrates the importance of win : loss ratios and the psychology behind your decisions.
- Spend some time pondering this idea and decide whether you agree with view.