The now dominant conventional wisdom about any financial activity is more or less this (as propagated by the well-known ZeroHedge site) :
The financial industry is a complete scam designed to funnel money from the 99% of the investing public into the hands of the top 1%.
Sure, some of you will make good money, but basically the rest of us will lose, and who is feeding off us?
Hedge funds and the 1%.
You have better odds if you go to a casino and play the slots, the worst paying game in the house, but still better than the stock market.
In fact, almost all investors do not make money, but consistently lose or at best survive at break-even or with very little profit.
Profit distribution. The more high-yielding an asset, the higher the corresponding degree of risk….
They usually do not know how to manage themselves: they take on too much debt, invest too much in risky assets, do not care about balance sheet stability, expect high profits in a short time, and expose themselves to various dangers.
For those who have not studied probability theory, the normal or Gaussian distribution (or error curve) is a probability distribution that is used as an approximation to associate random variables with real values that tend to concentrate around a single mean.
So it is easy to understand that the average investor will statistically fall on the sides of the bell curve and not in the middle.
And the more risky/reward oriented his or her business is, the more the bell curve will tend to have a cusp shape (blue color).
In fact, it is necessary to learn to always apply the following principles :
Cut your losses
Trade on winning stocks
Limit your exposure to a stock
Follow the rules without arguing
Learn when to break the rules
But being able to follow this seemingly simple method is a truly difficult undertaking that requires years and years of introspective analysis.
A psychological preparation that is the central part of the path.
Otherwise, one will be shipwrecked in a short time.
Even if the initial profits are high.
