Wow, the title of this thread seems to have changed drastically since I subscribed to it initially. A lot of interesting points made by a lot of knowledgeable people. However, the question being asked cannot be completely covered with one or two factors. I am by no means a pro trader in the sense that I know just about everything, but in my trading career I have learned a lot of valuable (and very costly) lessons from the mistakes I made, and indeed still make today.
I started trading in 2010, and through the years I figured out quite a bit of what I personally need to do to avoid my mistakes and consequently my losses. People started asking me what my 'secret' was to my consistent profits (I must point out these profits are small profits - have a long way to go before I can call myself a millionaire 😄) The result of the consistent nagging was a training course I developed over the years (started a manual to teach myself - turned into a course I now teach others). Attached are my own personal trading rules that help me minimize my losses and maximize my profits.
Again I wish to point out that these rules were created by myself, for myself, and by no means are supposed to reflect the views of a pro trader, because I don't consider myself a pro in any way. They are probably very 'cheesy' in many people's view, but they have saved my trading account more times than I can count, and in fact helped me make a consistent profit (relatively small in comparison to most pro traders) over the last three years.
So the point I wish to make here, is that a trader's failure, being it a few small losses, a large loss or complete loss if the account, can all be traced back to the trader's decisions. These decisions are mostly related to the trader's 'trading psychology', but overall I think a lack of, or disregard of a trader's trading rules is ultimately the reason for the failure. When I take a loss I always check which rule I broke. After a loss which I feel was not due to the natural movement of the markets, I take a break from my trading read through my rules and identify which one I broke. Trust me, after breaking the same rule a few times you will start to remember NOT to do that while trading.
My advise to new traders (or any trader for that matter) is to start to write down your own rules. As you go along analysing your mistakes, you add new rules and so expand your 'business code of conduct' which will help you be consistently profitable in the long run. I'm not saying my rules will work for others, each trader has his/her own methods and strategies to trade with. And don't write down rules to impress others with. The market and other traders don't care about your rules. The rules are for yourself to improve your trading, minimize your losses, maximize your profits and keep you objective, focusses and disciplined (basically keep you from losing your cool while trading).
Anyway, just thought I would throw a spanner in the works here... 😄
Good luck trading out there!
Keep it simple, be disciplined, get rich slowly and above all protect your equity!