# Why most beginners lose

> Losing accounts are mostly explained by three ordinary habits, not bad luck: paying costs on too many trades, bets too big for the account and dropping the plan mid-trade. The numbers are in the journal.

- Course: [Trading Basics: How It Works, How Not to Lose Everything](https://productovi.com/courses/trading.md)
- Module: What is trading, and should I even try?
- Lesson 3/32, ~27 min
- Source: https://productovi.com/courses/trading/why-most-beginners-lose

## Not bad luck

**Alex Tutor:** Back on your Pebble practice account, let's take on this module's awkward question: why do most beginners lose? First, the honest part about "most".

**Alex Tutor:** Studies of retail trading accounts in several markets keep finding that most lose money. The exact share varies by market and period, so there's no magic number. The safe assumption: you are not the exception.

![Nora piles big pebbles into a tall, wobbling tower while Marc builds a low, steady wall next to a small notebook; Alex watches with a phone.](https://productovi.com/courses/trading/diagrams/m1-l3-scene-tower-and-wall.png)

**Alex Tutor:** Before Nora joins in, one check on what we can honestly say about "most".

> **Exercise:** What can you honestly say about how many beginners lose money trading?

**Nora:** Speak for yourself. I made 300 on Bluefin this week. Next week I'm doubling my size and doing it again.

**Marc:** Nice week. What does your journal say about the last three months?

**Nora:** Journal? I remember my wins. That's enough.

**Alex Tutor:** Memory keeps the wins; a journal keeps everything, costs included. Here's one beginner's full year on a 10,000 practice account. gross_result is the result before costs; every trade cost 3.00.

**Dataset (CSV):** [One beginner's practice year](https://productovi.com/datasets/trading/why-most-beginners-lose/beginner_months.csv)

> **Exercise:** Over the year the gross result adds up to +290.00, and there were 244 trades at 3.00 each. What was the net result for the year, in dollars?

## Habit 1: paying for every trade

**Alex Tutor:** Look at the size of the costs: 732 is 7.32% of the 10,000 account (732 ÷ 10,000 = 0.0732). The trader paid that just for being in the market, win or lose.

**Nora:** Three dollars a trade is nothing.

**Marc:** Three dollars, twenty times a month. That's about 60 a month before you've earned a cent.

**Alex Tutor:** Exactly. This trader paid 61 a month on average (732 ÷ 12) but earned only about 24 a month before costs (290 ÷ 12). Costs grow with the number of trades, not with their quality.

> **Exercise:** Count the months with a positive gross_result, then the months with a positive net_result. How many months were positive before costs but negative after them?

**Nora:** But that trader was right most months! Seven out of twelve.

**Alex Tutor:** Right before costs, and no account pays out "before costs". A number without costs describes a world where trading is free. That world doesn't exist.

**Marc:** That's why I write "before costs" or "after costs" next to every result. Only the second one shows up on my statement.

**Alex Tutor:** Remember the pattern: many small trades in the right direction can still add up to a loss, because each pays its toll. Fewer trades, lower bar to clear.

![Seven months were positive before costs but only four after; 244 trades at 3.00 cost 732.00 and turned +290.00 before costs into −442.00.](https://productovi.com/courses/trading/diagrams/m1-l3-before-after-costs.png)

*July, August and September went the right way and still lost money.*

> **Exercise:** A year that is profitable before costs is a profitable year.

## Habit 2: bets too big for the account

**Alex Tutor:** Now Nora's plan. Look at the last column: this trader usually put between a fifth and a third of the whole account into one position. That's the second habit: bets too big for the account.

**Alex Tutor:** Big positions make every month louder, bad ones included. November and December lost 184.53 and 151.97 after costs, with positions near 30% of the account. Double the size, and the same price move swings twice as hard.

![A position of 30% of the account loses 1.5% of the account in a 5% price drop; doubled to 60%, the same drop takes 3%.](https://productovi.com/courses/trading/diagrams/m1-l3-double-size.png)

**Nora:** But my week proves I'm good at this.

**Alex Tutor:** One week is a handful of trades, far too few to tell skill from luck. We trust a win rate only after at least 30 trades. A lucky week says nothing about doubling.

**Marc:** Here's the sum I do before any bigger bet. If Nora's usual position is 30% of her account, doubled it's 60%. A 5% price drop then takes 3% of the whole account in one trade.

**Alex Tutor:** Do Marc's sum yourself with smaller numbers before we weigh the two habits.

> **Exercise:** Nora's usual position is 25% of her 10,000 practice account, and she doubles it. The price then falls 4%. How many dollars does that one trade lose, before costs?

> **Exercise:** Two habits, trading often and positions too big for the account. In the beginner's practice year in this journal, which one explains the loss best?

## Habit 3: changing the rules mid-trade

**Alex Tutor:** The third habit doesn't show in this table, and that's the problem: dropping the plan once a trade is open, holding a loser "until it comes back" or moving the exit further away.

**Marc:** My plan fits on a card. Before a trade I write three lines: why I'm in, where I get out if wrong, how big. Afterwards one more: did I follow it, yes or no.

**Nora:** And if a trade just needs a bit more room?

**Alex Tutor:** That's how a small planned loss becomes a big unplanned one. Worse, the journal stops teaching you: if the rules change every trade, you can't tell whether the plan or the mood made the result.

![At the planned exit the loss is small; once the exit is moved further away and the price keeps falling, the same trade ends in a big unplanned loss.](https://productovi.com/courses/trading/diagrams/m1-l3-moving-exit.png)

**Alex Tutor:** If the table can't show this habit, something else has to. What would?

> **Exercise:** Which journal entry shows the third habit, changing the rules once a trade is open?

> **Exercise:** Match each habit with what it does to the account.

## The numbers are in the journal

**Alex Tutor:** So losing accounts mostly come down to ordinary habits, not bad luck: too many trades, oversized bets and rules that bend mid-trade. Luck comes and goes; habits repeat on every trade.

**Alex Tutor:** Each habit leaves a number in the journal: trades × cost per trade against the gross result; position as a share of the account; the share of trades that followed the plan.

![Each habit shows as a journal number: trades × cost against the gross result, position size as a share of the account, and whether each trade followed the plan.](https://productovi.com/courses/trading/diagrams/m1-l3-habits-journal.png)

**Nora:** Fine. Before I double anything, I'll count my trades and costs for the last three months.

**Marc:** And keep your size where it is while you count.

> **Exercise:** Three habits explain most losing accounts: trading too often, positions too big for the account, and changing the rules once a trade is open. Which one do you think you'd be most likely to fall into? Name it, and name the number in a journal that would show it. Two or three sentences.

> **Before you go**
>
> This course is educational, not financial advice. Most people who trade lose money, and you can lose all the money you put in. For taxes and rules, talk to a licensed professional where you live.

- Previous lesson: [Where the money goes: spread, fees and slippage](https://productovi.com/courses/trading/where-the-money-goes.md)
- Next lesson: [Case: three promises that sound too good](https://productovi.com/courses/trading/too-good-to-be-true.md)

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