Loss aversion trading

This is a discussion on Loss aversion trading within the Psychology, Risk & Money Management forums, part of the Methods category; Traders often close positions to avoid a loss ,they take small profits in fear of a larger loss , they ...

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Old Jun 17, 2017, 3:56pm   #1
Joined Apr 2017
Loss aversion trading

Traders often close positions to avoid a loss ,they take small profits in fear of a larger loss , they put on revenge trades to recover losses , they add to losing positions to average down , they hold on to losing positions , they convert positions into options trades to avoid taking a loss.

Loss aversion traders lose more in trying to avoid losses.

In economics and decision theory, loss aversion refers to people's tendency to prefer avoiding losses to acquiring equivalent gains: it's better to not lose £5 than to find £5. Some studies have suggested that losses are twice as powerful, psychologically, as gains.

Loss aversion examples
https://www.hitinvestments.com/15-ex...loss-aversion/



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Old Jun 19, 2017, 7:34am   #2
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foroom lluzers started this thread loss aversion proof

http://www.businessinsider.com/colin...nt-2013-9?IR=T
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Old Jun 19, 2017, 9:27am   #3
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Its true.

What we wrongly call get-rich-quick schemes are actually often marketed and even designed as low-risk schemes. The people we denigrate for wanting to get rich quick are actually usually more interested in not getting poorer through risk. And do they get rich as a result? - No.
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Old Jun 19, 2017, 10:06am   #4
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foroom lluzers started this thread People like to have emotional fulfillment , as opposed to doing a job correctly.

A barrister was appointed for a 3 hour job , instead of presenting the case to win , he wanted to do the least amount of work and have an easy session in court , he lost the case .He wanted to run with the money , do a easy job , get paid , and enjoy his time and spend the money!

Traders are very similar they enter a trade , make a profit and run with it , before they lose out the profits into evaporation of a failed trade.
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Old Jun 19, 2017, 10:44am   #5
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This might be interesting -
https://hbr.org/2013/03/do-you-play-...or-to-not-lose

It relates to organisational management but the not-lose personalities who are so damaging in business / public service must also be represented in the trading community.
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Old Jun 19, 2017, 10:47am   #6
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foroom lluzers started this thread
Quote:
Originally Posted by tomorton View Post
This might be interesting -
https://hbr.org/2013/03/do-you-play-...or-to-not-lose

It relates to organisational management but the not-lose personalities who are so damaging in business / public service must also be represented in the trading community.
Did you give it to Barjon

He plays to protect his bottom line (account balance).
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Old Jun 19, 2017, 10:57am   #7
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The timing of the thread is interesting. Discussions on another website were making me think of starting a thread here to collate people's tactics for increasing profits on winning trades, rather than identifying great entries or managing risk or overall strategies.
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Old Jun 19, 2017, 11:03am   #8
 
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Quote:
Originally Posted by foroom lluzers View Post
Did you give it to Barjon

He plays to protect his bottom line (account balance).
Yup, that's it. If you don't think trading is about your bottom line then you're living in cloud cuckoo land.
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