In the market of trading, the vast majority of people end up losing money, which is a harsh reality. Many people share their experiences of losses when they chat with me. I myself was once among the losers, so today's topic is particularly meaningful and deserves everyone's serious consideration.

Today, I will provide a detailed analysis of the internal and external causes of losses, including the problems inherent to the traders themselves as well as issues within the trading market. You can reflect on your own situation and make corrections accordingly, which I believe will be helpful.

Let me first discuss the internal causes related to the traders themselves. The reason why most people lose money in the market is the lack of a trading method and jumping in without any preparation.

1. Most traders start trading without any knowledge of trading techniques.

Many traders underestimate the difficulty of trading. They begin without systematic learning or developing their own trading methods. Some traders have been losing for a while but still don't understand the basic trading rules or terminology, let alone trading techniques.

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Whether you are into technical analysis or fundamental analysis, you need to master the corresponding knowledge and skills. Otherwise, you are just the most vulnerable in the market, constantly feeding money into it.

The trading market is very unique, with almost no barriers to entry. You can start with just a bit of money. However, the lower the barrier, the higher the difficulty of success. It's like playing a game that offers a free trial at first, but once you're hooked, it starts charging you in various hidden ways. Moreover, there are many wealth myths in the trading market. Many people get excited after hearing about them, only to find out that it's not the case once they enter.

When you blindly bump into the market, human nature and emotions are amplified, causing continuous losses that you can't stop. Who is making money in the market? It's those who come prepared, willing to learn, summarize their trading methods, control their human emotions, and enter the market more rationally and objectively. Isn't the chance of winning much higher for them?

So in trading, most people are in a state of panic and disorder, following the market trends and chasing gains and losses. As long as you can understand risk, technology, and self-discipline, you are highly likely to make money.

2. Traders often overlook the issue of position sizing, using positions in an extremely unreasonable manner.Some may argue, does possessing technical skills guarantee a steady profit in the market? The answer is no. A friend once messaged me, stating that his trading success rate over the past year was 60%, yet he still ended up with a loss. He felt at ease and believed he could make a profit when trading with a light position, but as time went on, he became more aggressive, started trading with heavier positions, and even went all-in, which led to significant losses.

His 60% success rate over a year indicates that he has trading skills, and they are quite impressive. However, his losses stem from the improper use of position sizing. Random position sizing can amplify your human nature; sometimes, when you're confident about making money, you increase your position size, and other times, when you're fearful of losing, you reduce it. The outcome is often more losses than gains, resulting in an overall deficit.

The technical methods and importance of position sizing are on par with trading skills and must be taken seriously by traders.

3. Often, the root cause of trading psychology is a lack of technical proficiency.

In the market, it's commonly said that losses are due to poor mentality. But based on my experience, most people with poor mentality are actually lacking in trading skills. It's similar to taking a driving test; if you've practiced all the questions, you won't be nervous during the exam. If you've only practiced a third of them, and you encounter a question you don't know, you'll surely start to panic.

Once you have your own trading method, have you mastered all the details of this method? Have you conducted extensive testing? Do you have very reasonable position management rules? Have you tested your own limits? When you've perfected all the details, you won't panic in the exam of trading; most questions you encounter will have standard answers. Even if 10% of the questions slip through, you can still achieve an overall profit.

The saying "the higher the skill, the greater the courage" applies here.

Let me also discuss external factors: Financial markets are inherently zero-sum games, and the 80/20 principle dictates that most people will lose while a small minority will profit.

Speculative trading markets do not create wealth; they merely facilitate the transfer of wealth, which is why they are called zero-sum markets. In the book "The Black Swan," there is a statement: A minority in the market reaps the vast majority of the profits, while the vast majority work very hard but may still end up with nothing.

In such markets, you must essentially take money from others' pockets. Some people will amplify their human nature excessively, such as loss aversion, recency bias, anchoring effects, and so on. Each human weakness can lead to losses. Therefore, only those traders who are extremely disciplined and objective can get a share of the profits, while most people are unable to control themselves and end up as cannon fodder in the market.Moreover, most people have no awareness of the risks in the market and start with the intention of making money, making a lot of money, which is highly likely to result in severe losses. On the other hand, those who enter cautiously have a higher probability of making a profit.

Therefore, it is essential for everyone to clearly recognize the high risks associated with trading markets. Do not blindly start live trading, and certainly should not recklessly give up their regular jobs to start full-time trading. One can begin by learning the basic knowledge of trading, gradually understanding the market, forming their own comprehensive trading system, and only after confirming the ability to make long-term profits, then proceed step by step to more advanced levels.