A closed loop is where a pump pulls water out of the tank and pushes it right back into the tank via 2 outlets. If you have a SCWD (switching current water director) on the closed loop you will get a back/forth effect, in other words the water will come out of one side and then switch to the other side. The scwd opens and closes left and right allowing the water to go from one side to the other. Have a look at this link, it may help you understand better. http://www.melevsreef.com/closedloop.html
Also, I have 1200gph overflow on my tank as well, I use 2 660gph pumps to return water to the tank and IMO
need more. I plan on upgrading to a MAG 24 and split the line via another scwd. I have a closed loop on my tank witha scwd exactly as you will see on the link above. I would like to also uprade that pump to a mag 9.5. HTHs!!