This issue is quite daunting, but if you are a newcomer who has encountered this question, congratulations, you are on the right path to trading.

I once said that whether it's trading or gambling, if you start making profits right away, and substantial ones at that, some people call it "beginner's luck," but I prefer to call it "the devil's luck." This is because if money comes too quickly and easily, some individuals lacking self-control will get lost. Their views on money become distorted, they can no longer appreciate small gains, and they start trading with heavy positions, leading to a vicious cycle of losses.

The most important lesson to learn before entering the financial market is to anticipate risks.

You can ask yourself, how much money do you want to make through trading? Is your goal to increase your assets or to make a fortune with a small investment?

If you incur trading losses, will it affect your life?

Does your personality allow you to cut losses in time, or are you completely lacking in self-control?

After asking these questions, we can decide whether or not to enter the financial market.

So, why do the vast majority of traders end up losing money?

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1. Due to the peculiarities of the financial market.

I believe many friends have heard of the 80/20 rule, such as the distribution of wealth in our society, where 20% of the people control 80% of the social wealth; 80% of people with procrastination will put today's tasks off until tomorrow, while 20% will bring tomorrow's tasks to today; and there are 20% of people who will persevere when faced with difficulties, while 80% will give up.The 80/20 rule is ubiquitous in life and also determines what kind of people will succeed and what kind will fail.

As for the financial market, it is even more ruthless than real life because there are no rules in this market, only human nature. Therefore, the financial market even surpasses the 80/20 rule, and the number of people who make a profit may be less than 10%. In the face of money, most people want to make a big profit with a small investment, hoping to turn their fortunes through trading. Thus, those who have a stable personality, strong self-control, modest profit expectations, and hold capital are quietly reaping the benefits from those who seek quick success.

Some people might argue that the world is inherently unfair, and those who hold capital can only stay steady because they have capital.

Actually, this is not the case. We, as small investors with small amounts of capital, can also have low return expectations and take things slowly, but how many people are in a hurry to make money? How many people want to make a big profit with a small investment? How many people do not treat money as money, thinking that they might as well gamble it all and if it's gone, it's gone?

So it's not about the amount of capital, it's about the person. In the financial market, human nature is the rule.

2. Too many people are dominated by human nature.

As mentioned earlier, there are no rules in the financial market, human nature is the rule.

Trading is a very counterintuitive activity. Human nature seeks comfort, dislikes risk, fears loss, thinks it is better than others, dislikes effort and learning, lacks patience, etc., and these traits are infinitely magnified in trading.

There is a saying in the trading industry: 70% of trading profits come from mindset, and 30% from technical skills. In practice, it seems not difficult for traders to correctly predict the market trend, but it is very difficult to complete this trend and make a profit. Why is that?

Let me give two examples.For instance, the issue of stop-loss in trading.

The pursuit of benefits and avoidance of harm is a characteristic of human nature; the reluctance to lose and to accept losses is a form of self-preservation. When the direction is wrong and a stop-loss is needed, it implies a loss of our hard-earned money, which is difficult for anyone to bear. Thus, in practice, many people, despite knowing rationally that the direction is wrong, still do not set a stop-loss, and may even add to their positions against the trend, allowing their orders to float and the stop-loss to grow larger, eventually leading to significant losses.

Take the holding of profitable positions in trading as another example.

Market trends often fluctuate upwards or downwards, and during profitable trades, it is common to experience the giving back of profits. Once profits are given back, a sense of insecurity arises within us, worrying about a market reversal and the loss of gains. This sense of insecurity is also a result of human nature.

Even when we intellectually understand that the target profit level has not been reached and we should continue to hold our positions, the desire to secure our gains torments us. In the end, we often cannot resist closing our positions, earning less than we could have. We comfort ourselves by thinking, "It's okay, at least we didn't lose money." However, in reality, earning less is equivalent to a loss because the amount you lose in the next trade will be greater than what you have earned. Over the long term, your overall result will be a loss.

There are many such examples: betting on market trends, trading with heavy positions, unwillingness to admit defeat, and not setting stop-losses leading to account blow-ups, all stemming from the human aversion to loss and fear of failure.

In fact, if we look back at the trading markets of 100 years ago, the human nature issues are essentially the same as they are today. The weaknesses of human nature are very powerful and are a major cause of traders' losses.

That's why at the beginning, I asked everyone to ask themselves those questions, to help you understand your own personality, your current situation, and your human nature, which can give you a certain advantage in the trading market.

Trading is like a free game; it seems to have a low barrier to entry and no cost, but in reality, some hidden costs are embedded within it, playing with human nature in a very clear and distinct way. Therefore, before engaging in trading, one must have a risk expectation first, and then think about making money.