Loss aversion is the cognitive bias where the pain of a loss is felt far more strongly than the pleasure of an equivalent gain — studies put it around 2.25 times. In trading it causes people to hold losing positions too long (avoiding the pain of realizing the loss) and to close winners too early, which is exactly backwards.
This term belongs to Trading psychology. See how it fits the bigger picture in The Mind, part of the free DEGEN ACADEMY — or watch it play out on the live terminal.
FAQ
What is Loss aversion?
Loss aversion is the cognitive bias where the pain of a loss is felt far more strongly than the pleasure of an equivalent gain — studies put it around 2.25 times. In trading it causes people to hold losing positions too long (avoiding the pain of realizing the loss) and to close winners too early, which is exactly backwards.