Education, not investment advice. Trading can lose you money. How we check every fact
Topic
Most trading mistakes are not about missing information. They are about how losses, wins and other people's excitement change the decisions you make next.
This topic is about the habits of mind that cost traders money. They are not character flaws. Researchers have measured them in hypothetical choice experiments, in tens of thousands of real brokerage accounts and in professional futures traders. Knowing them will not make you profitable, but it can help you avoid the most common ways beginners turn a manageable loss into a large one.
The evidence is sobering. In a study of 66,465 US households from 1991 to 1996, those that traded most earned 11.4% a year after costs while the market returned 17.9% [1]. In 15 years of Taiwan Stock Exchange data, the aggregate performance of day traders was negative, and more than 75% of day traders quit within 2 years [2].
If you are new, read in this order. Start with loss aversion trading: why a loss hurts more than an equal gain pleases, and why that leads people to hold losers and cut winners. Then overconfidence bias trading shows how feeling sure leads to more trades and more costs. FOMO trading covers chasing prices that already moved and how scammers use the crowd. Revenge trading looks at what happens to risk-taking right after a loss. A trading journal explains how to keep records that show what really happened, and do most day traders lose money brings the research on results together.
Every page links each number to its primary source, includes a worked example calculated in code, and lists the mistakes beginners make most often.
Start with this
Trading Psychology8 min read
Why a loss hurts more than an equal gain pleases, what the research found about holding losers, and a simple way to decide your exit before emotions take over.
Read the explainerTrading Psychology7 min read
Overconfidence leads people to trade more than is good for them. What the brokerage data shows, why traders rarely notice, and how to check your own confidence.
Trading Psychology8 min read
Why the fear of missing out pushes people to buy after a big rise, how common it is, how scammers exploit it, and a few checks to slow the decision down.
Trading Psychology9 min read
Why a loss pushes people to take more risk, what a study of futures traders found, and the numbers behind a loss spiral that starts with one bad trade.
Trading Psychology8 min read
The fields worth recording, a filled-in example entry, a weekly review in numbers and why ten trades are not enough to judge yourself.
Trading Psychology8 min read
The studies behind the claim that most day traders lose, the role of costs and overconfidence, and the questions to answer before you try it.
A drawdown is the fall in an account's value from its highest point, as a percentage of that peak. How to measure it and why recovery takes more, with examples.
A stop-loss is an order to sell (or buy) once the price hits a level you set. Why the fill can be worse than the stop, with a calculated example.
Leverage lets a small deposit control a much larger position, so small price moves become large gains or losses. What it means, with calculated examples.
Margin is money you put up as collateral so a broker lends you the rest of a position. How margin calls work, with a calculated example and real limits.
No page here can promise that. Good habits can limit avoidable losses, but most of the research we cite finds that frequent traders as a group do worse than the market after costs [1].
Read loss aversion trading first, because it explains why small losses so often become large ones. Then decide your risk per trade with position sizing.
