Many traders and investors often experience the frustration of the market going against them “most of the time”. Many people say that “it always goes down whenever I buy, and it always goes up whenever I sell!” Is it a matter of bad “luck”? Or are there some very basic reasons why most traders lose money?

Without a highly systematic and controlled way of engaging the markets, the markets are always rigged against us. It is not unlike going to a casino, where your chances of making money in the long term are practically zero. In the casinos, all the games are rigged against us in the sense that they always have an edge over us. An “edge” is simply a statistical advantage that ensures that you will lose money if you stay long enough in the game. In trading or investing, that “edge” is largely due to many weaknesses in the human psychology, and the interactions between market movements and human emotions. Removing that edge is largely dependent on mastering the psychology of trading, which is far more crucual than sophisticated technical analysis.

This month’s record shows a relatively low trading frequency. Most of the trades were based on some form of trailing stops. As such, the average loss is smaller than the average win. Such exit strategies can go a long way towards enhancing the overall profitability, because we can stay with the occasional strong trends for rather long, and exit quickly when the market is choppy.