That is the concept of zero sum needs to be examined through the concept of complete liquidation. While it is definitely true your guide counterparty may reap the benefits of purchasing your profitable position, the net result of all the positions from the market has to balance to zero (technically it#8217;s negative once you account for transaction costs, but let#8217;s keep it simple).
The error in logic that is occurring on your concept is the assuming the Foreign Exchange market is a part of the money supply. It actually operates independently of what happens with regard to the growth and contraction in the whole quantity of currency units in presence (not unlike a stock in connection with the company it is intended to signify ). A Foreign Exchange contract is not a monetary unit; it is a commnt to transact monetary units.
Let us examine 1 contract between two parties. Irrespective of the requirement for either party agrees to offer a number of units 3 times from now to the other party. Once the contract (transaction ) is executed the agreed upon rate between the 2 parties will not change. On the other hand, the value (as determined by other participants in the market) will vary between the time the contract has been executed and the time it is eventually delivered. Some actual numbers will produce more sense I imagine#8230;
Party 1 offers celebration two 100,000 USD for $200,000 CAD. As soon as they have made this agreement, the exchange rate is fixed between them. If the market rate has shifted that USD is worth $300,000 CAD, celebration 2 can market the agreement to someone else and pocket the $100,000 CAD. Party 1 may also liquidate the contract, however he would need to take a loss of $100,000 CAD. The simple fact that someone else can assume that contract is irrelevant and here#8217;s why:
Lest say celebration 3 and celebration 4 buy the agreements from party 1 and party 2 respectively. What would happen if the market rate transferred back to its initial value of $100,000 USD CAD? Party 3 could gain $100,000 Party 4 and CAD would lose it. The value of both the gains and losses is zero, as you can see, and Foreign Exchange is thus a zero sum game.
It gets confusing because the markets are so big. More often than not, parties 1,2,3, and 4 are not dealing with the same single contract. A Foreign Exchange contract is standardized, so they are interchangeable with any other and thus this simple example would probably mushroom out to 6 parties trading 5 distinct contracts from the actual world. Even though all 6 of these parties manages to make a profit in their dealings by liquidating at different times, somewhere down the line someone (or an aggregate of someones) will shed the precise quantity of profit these parties gained. In Foreign Exchange the part that is someTIME is 3 times into the future. 3 times after all these trades happen, each contract will need to be settled; which is why most people can grasp how Foreign Exchange is zero sum while the stock market supposedly is not.
I said the stock market is zero sum on a long enough timeline because it adheres to the same mechanics, but with no settlement date. The winners are rolled forward in time. If all the positions in both markets were liquidated at precisely the same time the losses would accrue to the winners. And so they're zero sum.
NOTE: I don#8217;t know if my celebration 1, 2, etc profit accrual instructions are correct. It takes components for me to figure out in my head. Just know that the concept is correct even if the correct winners aren#8217;t