People lose money at the stock market for very simple reasons:
1. They don’t have a method at all. They rely on other people opinions.
2. People don’t have a winning method. The method they are trading has a negative expectancy. Being disciplined about stop losses and position sizing won’t help, if you are trading a losing method. Expectancy changes with volatility. When your method stops providing satisfying results, you either find another that is working in the current market conditions or stay on the side until things change.
3. Those who have a winning strategy often don’t use it. They get emotional and forget about their strategy.
“Good trading is 10% technology and 90% psychology. People defeat themselves. It doesn’t matter how often you repeat basic trading principles when almost no one will practice them” (Maoxian)
Everybody knows the four cardinal rules of trading, but so few people follow them — 1) Trade with the trend. 2) Cut losses short. 3) Let profits run. 4) Manage risk.
There is a big difference between knowing something and applying it. Most people don’t use what they know.