The real culprits are stops and targets. When you use them your expectancy in the absence of an edge falls. Add commissions and slippage, even without leverage, you are at 10% win 90% lose. Add leverage, you burn quickly. So what should you do? Your answer will show if you can consistently extract money from the markets
I once had 23 trades in a row that went wrong way in futures market covering 15 different commodities, but it only killed less than 20% of my account. Reason people lose are many, but often lack of knowledge dealing with risk management, they put profits ahead of all the worst things that can go wrong first. You have to have an answers before questions is best. The 24th trade made up all the losses but took few months, but if I had quit, I would not have caught good move. Most people so much time making their system and yet don't back test it on large enough of data, so they don't know what has happened and think what has happened, it will never get worse in future, I can say from experience, it will get worse in the future no matter how much I back test, records are made to be broken.
Simple: people over leverage. They don't risk 1 or 2 % of their account balance. Why do you think so many people scream when IB raises its margin requirements for example? Undercapitalized and overleveraged.simple as that.
Complex answer? If that is considered complex then yes most would not grasp how to trade profitably. BTW, agree with everything you said. Just don't think it's complex. It's pretty straight forward the way you explained it.
Its 5% of the profit or loss. Your odds of winning based on a random entry are no longer 50:50, they now become worse than the odds of a random guess at a roulette wheel. (European roulette tables with a single green have a 2.5% house edge, American tables with double greens have a 5% house edge) Yes if you have a big edge and let your winners run then a 1 tick spread is almost nothing, but the OP is asking why traders might lose even with a random entry.
Good point, especially the part about fitness/trading prime. Very important for a trader or an athlete to realize prime is just a period of time. Prime trading is not eternal.
At least someone who understands how the game works! This game can work if and only if losers stay losers, new entrants become mostly losers, and winners are few. If not, game is dead. This is why IMO internet poker is dying. Losers lose less and less, thanks to AI. What is the interest for winners? Cake is too small. Maybe trading would be dead too if losers make less and less mistakes thanks to AI ? Obviously, this is not tomorrow : markets are quite more difficult to modelize than Texas Hold Them ! CM
The reason is the normal distribution of returns. Let's suppose you want to bet only on the long side. For every 10% up move, there is going to be 5 2% down moves or 3.333 3% down moves on average in the long run, so you're still 50/50. Your betting scheme is not going change the expectation of the game. And that does not include transaction costs.
It's actually pretty easy...options. With enough leverage, it's possible to lose just about any amount of money in a matter of hours or minutes. Same as going to Vegas and putting it all on red.