Overcoming Loss Aversion: Why Cutting Winners and Holding Losers Destroys Accounts
Loss aversion makes you cut winners early and hold losers too long. Learn the psychology behind it. The cutting-winners trap, and the exit rules that fix it.
What Is Loss Aversion?
Loss aversion: the pain of losing is 2x stronger than the joy of winning. This makes traders take profits early (to lock in the good feeling) and hold losses (to avoid the bad feeling).
The Fix
Set mechanical rules: stop and target are placed with the entry order. You do not touch them. The trade runs to its conclusion. You are a robot, not a feelings-machine.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70-80% of retail investor accounts lose money when trading CFDs. Backtesting does not guarantee future results. Always consider whether you can afford the potential loss of your capital.