The common saying is that 90% of traders lose money in the markets. That’s not an encouraging statistic for someone who wants to start trading, but there are some key reasons why most traders lose and knowing them can help you to avoid the same mistakes and increase your chances of success.

The first mistake is to jump into the markets without knowledge. That’s like gambling and if you don’t know what you’re doing and why, then you won’t survive for long. Just look at how many retail traders jumped into the markets during the covid crisis.

There are stories of lucky people changing their lives for the better yes, but they are very rare compared to those losing all of their life savings or worse having to pay back huge debts as they gambled with money they didn’t have. In the chart below you can see how in just two years retail traders went from heroes to zeros.


The second mistake is getting the wrong education from social media influencers whose goals are just to sell courses and trading signals. You have to be careful when you invest in education because “an investment in knowledge pays the best interest”, but an investment in wrong education is deadly in trading. You better find some free resources and at least get some basic knowledge first and then if you want to invest in some course or trading community, make sure to do your due diligence before committing. Friendly tip: avoid anything that focuses on technical analysis.

Once you have some knowledge, you need capital. The rule of thumb is to invest/trade only the money you can afford to lose. DO NOT trade money you need to pay bills or to live off of in general. If you do that, you will already set yourself up for failure because the psychological pressure will be so high that you will easily make any kind of emotional mistake, from fearing of missing out to revenge trading. Statistically, more than 50% of new businesses fail due to undercapitalisation. Avoid this mistake and you will be another step ahead of the majority.

Even if you get the knowledge, skills and capital, the last thing you need to get is experience. Real life experience can’t be taught, it’s something you acquire through practice and mistakes. It’s the very best teacher for anything in life.

Yes, you can learn something from other people’s experience, but nothing can substitute your own. In fact, many successful traders study the past experiences to better forecast the future. A famous saying by Mark Twain goes like “history doesn’t repeat itself, but it often rhymes” and that happens in the financial markets as well. The business cycle repeats many times and the market most of the time follows the same pattern of boom and bust.

A recent example is how bad equities performed when the Fed in 2018 was running QT and the global growth was slowing down. Now we are in 2022, the Fed is starting QT, global growth is slowing down a lot and equities are in a bear market…

This article was written by Giuseppe Dellamotta.