1) Trading fees. If the house takes a cut of 0.1% on every transaction, then on average those who trade more lose more money.
2) Risk/reward tradeoff. If you buy deep out-of-the-money options, you might have a 5% chance of profitability, but expected return of $0 (neither positive nor negative). 95% of the time you lose $X, and 5% of the time you make $19X. If traders are pursuing riskier strategies, you'd expect most of them to lose money.
For point 2, if there is an expected return of 0, then on average this should push the portfolio toward 50% chance of profitability.
It is the psychological factors combined with a non-random market that ensure most traders lock in losses (usually after riding them too long or not long enough).
If you trade derivatives, fees can be very low (because these are highly-leveraged products but if you are smart you know you shouldn't take any leverage). This can save substantial money if you trade frequently.
> Risk/reward tradeoff. If you buy deep out-of-the-money options, you might have a 5% chance of profitability, but expected return of $0 (neither positive nor negative). 95% of the time you lose $X, and 5% of the time you make $19X. If traders are pursuing riskier strategies, you'd expect most of them to lose money.
There is more to trading than predicting the direction of a stock/currency. You can provide liquidity and arbitrage a stock and its derivatives. Having traded for a while, arbitrage opportunities do exist; though sometimes you might have to be patient and cut off trading until an opportunity arise. This can be quite a time (like a year with no trading opportunity) and will require a lot of self-control.