Loss aversion: what does it do to your trades?

FTC Community TeamStaff98 views

Losses hurt about twice as much as equal wins please, and the asymmetry drives classic mistakes: holding losers too long, cutting winners too short, avoiding necessary risk.

Loss aversion: what does it do to your trades? — risk-reward diagram
A risk-reward ratio of 1 to 2

What's your experience?

  • how loss aversion shows up for you
  • the trade it ruined
  • the frame that reduces its power
Loss aversion: what does it do to your trades? — central bank rate path diagram
A central bank's policy rate path across recent meetings

The risk-reward guide works against the asymmetry with numbers.

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