There are two common ways of thinking that make retail investors lose money, but the market is constantly evolving—so it won’t wait for your script.
The first is an obsession with being “perfectly precise.” You enter only when you can land on the exact point you drew yourself. Take-profit and stop-loss must be locked into the exact slot of your expectations. As soon as the market veers even slightly, you can no longer match it. You turn your judgment into a piece of ultra-precise measurement: a particular day’s Nonfarm Payrolls, the formation of a single candlestick, a specific integer-level threshold—everything must “fit the expectation” to count as valid. The problem is the market never performs according to your storyline. The more precisely you demand alignment, the more likely you are to get slapped in the noise again and again. In the end, you don’t necessarily die because your overall direction was wrong—you die in countless “just a bit off” moments.
The second is called “can’t hold it, and cares too much about right vs. wrong.” As soon as the position is floating in profit, they want to cash in as if they’ve proven they were correct. If it floats into loss, they rush to prove they didn’t misread it. So they add to the position, average down, or even liquidate outright to place a “more correct” trade next time. They obsess over whether this one trade won or lost, but they rarely ask: what is actually setting the price? Interest rates, liquidity, risk appetite, the structure of the position/chip distribution, and the strength of the narrative—these are the slow-moving variables behind price moves. Trading becomes like a debate: the momentary thrill of winning is exchanged for an inability to hold the trend—and an inability to withstand drawdowns.
The common thread between these two types of people is that they treat “being correct” as “hitting precisely.” But what’s worth more in investing is often “roughly correct”: the direction is mostly right, the odds are mostly adequate, and the position and drawdown stay within a range where you can sleep at night. “Rough” doesn’t mean being vague or dodging—it means acknowledging that the world can’t be perfectly modeled, and you can only grasp the main issues. For example, recognizing that “liquidity is tightening and risk assets are under pressure” doesn’t require you to calculate exactly how many points it will drop tomorrow, and you don’t have to nail the absolute low precisely. An error that is precise can be more dangerous: the model looks beautiful, the entry points look perfect, but the logic chain is built on the wrong causal assumptions. The more decisively you execute, the cleaner and more certain the loss.
So instead of asking, “Am I right about this trade?”, ask three rougher—but more useful—questions first: Has the main factor driving pricing changed? Does my position size allow me to be wrong for a while? If my direction is roughly right, can I hold on to it? If you can answer these three questions clearly, you’re already on the side of “roughly correct.”
Most retail investors lose money because they use precisely wrong decisions to fight a world that is inherently ambiguous.
The first is an obsession with being “perfectly precise.” You enter only when you can land on the exact point you drew yourself. Take-profit and stop-loss must be locked into the exact slot of your expectations. As soon as the market veers even slightly, you can no longer match it. You turn your judgment into a piece of ultra-precise measurement: a particular day’s Nonfarm Payrolls, the formation of a single candlestick, a specific integer-level threshold—everything must “fit the expectation” to count as valid. The problem is the market never performs according to your storyline. The more precisely you demand alignment, the more likely you are to get slapped in the noise again and again. In the end, you don’t necessarily die because your overall direction was wrong—you die in countless “just a bit off” moments.
The second is called “can’t hold it, and cares too much about right vs. wrong.” As soon as the position is floating in profit, they want to cash in as if they’ve proven they were correct. If it floats into loss, they rush to prove they didn’t misread it. So they add to the position, average down, or even liquidate outright to place a “more correct” trade next time. They obsess over whether this one trade won or lost, but they rarely ask: what is actually setting the price? Interest rates, liquidity, risk appetite, the structure of the position/chip distribution, and the strength of the narrative—these are the slow-moving variables behind price moves. Trading becomes like a debate: the momentary thrill of winning is exchanged for an inability to hold the trend—and an inability to withstand drawdowns.
The common thread between these two types of people is that they treat “being correct” as “hitting precisely.” But what’s worth more in investing is often “roughly correct”: the direction is mostly right, the odds are mostly adequate, and the position and drawdown stay within a range where you can sleep at night. “Rough” doesn’t mean being vague or dodging—it means acknowledging that the world can’t be perfectly modeled, and you can only grasp the main issues. For example, recognizing that “liquidity is tightening and risk assets are under pressure” doesn’t require you to calculate exactly how many points it will drop tomorrow, and you don’t have to nail the absolute low precisely. An error that is precise can be more dangerous: the model looks beautiful, the entry points look perfect, but the logic chain is built on the wrong causal assumptions. The more decisively you execute, the cleaner and more certain the loss.
So instead of asking, “Am I right about this trade?”, ask three rougher—but more useful—questions first: Has the main factor driving pricing changed? Does my position size allow me to be wrong for a while? If my direction is roughly right, can I hold on to it? If you can answer these three questions clearly, you’re already on the side of “roughly correct.”
Most retail investors lose money because they use precisely wrong decisions to fight a world that is inherently ambiguous.