Why is so hard to exit a losing trade?
Think about a trading situation where you find yourself in a losing position without a stop loss.
You have the option to take a certain loss or just continue to see what happens.
Exiting the trade could help you minimize your loss, but why do you delay to make a move?
Psychologists explained that we favor to believe that actions can do more harm than inactions, even though the result could be similar or painfully.
So, in a trading instance we feel that our action – to exit a losing trade immediately – could have a bad outcome than our inaction. This mind flaw was named as the omission bias.
We fail to step in because our misunderstanding of our feelings about the future outcomes.
So next time when you have a trade going against you, think about what consequence inaction could have to your portfolio.
You have the option to take a certain loss or just continue to see what happens.
Exiting the trade could help you minimize your loss, but why do you delay to make a move?
Psychologists explained that we favor to believe that actions can do more harm than inactions, even though the result could be similar or painfully.
So, in a trading instance we feel that our action – to exit a losing trade immediately – could have a bad outcome than our inaction. This mind flaw was named as the omission bias.
We fail to step in because our misunderstanding of our feelings about the future outcomes.
So next time when you have a trade going against you, think about what consequence inaction could have to your portfolio.
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