Human Errors
Lack of strict discipline
This is the major factor of loses. Small loses due to negligence, stress and mood swings accumulate very quickly and suddenly your trading account is empty again.
Bad timing
The most common errors are of bad timing
- not acting quickly enough (the spot moves away from a wick, so your stop-loss will be too far away and you will lose more)
- acting emotionally too soon (a re-entry into the same direction after being stopped-out - against contining trend, only to be stopped-out again).
Demoralized
Quick, unexpected bounces (shallow reversals) are annoying and demoralizing so one loses motivation and focus. However, these swings also good opportunities for an entry in the right direction. Missing them only adds to stress and despair.
One should understand the stress and desperation of the losing party (bulls in an established bear market, lets say) and to avoid emotional contagion, which is very real, and to avoid doing emotional shit.
Neglect
Sometimes we don’t feel like sticking to a strict discipline and want to improvise and to try something different. There is no worse thing that improvisation, especially if you don’t know how to play serious music.
Lots of loses happened because you are trying something instead of sticking to a simple rigorous system (only simple systems work consistently).
One might increase a position size on a whim, or, which is worse, to close a position due to intution or feeling while its stop-loss, it runts out, will not be reached. Closing a strategic position is a loss.
Don’t try to improvise is the second best advice, just after “don’t do emotional shit”.
Urge to enter
This is similar in nature to a gambler’s urge to place a bet. The difference between a gambler (and an inevitable, serial looser) and a trader is that trader must resist the urge to open an arbitrary position (in the middle of a range).
Positions shall be opened only at probabilistic-favorable (even slightly) conditions - within an emergent pattern, giving that other market condition has been read and interpreted adequately.
An arbitrary position in any direction is a guaranteed loss (will be
stopped-out due to local volatility). It is not a naive notion of
0.5 chance, it is almost 0.9 that the price will swing higher and
lower (back-and-forth) within a flat range.