Loss aversion and stubbornness, making some profit and then running away, how to deal with this kind of retail investor behavior!
Why does this situation occur? The reason is very simple: because we are human, and humans are creatures of fear and greed. Psychologists have found that people feel more aversion to losses than they enjoy gains. So, the sadness of losing 100 yuan is greater than the happiness of finding 100 yuan; this psychological phenomenon is called loss aversion.
Loss aversion can lead us to make incorrect decisions in trading. If our accounts show a floating loss, we treat it as a loss and are unwilling to acknowledge and accept it, which means we are reluctant to close positions, and even illogically choose to increase our positions in a losing situation. Conversely, when our accounts show a floating profit, we are eager to protect and enjoy this profit, worried that a price drop will cause the profit to disappear, triggering the loss aversion mechanism—rushing to take profits and exit the market. This impulsive and impatient trading habit inevitably leads to limited profits and amplified losses. It is like an invisible shackle that binds our trading thoughts and behaviors.
So how do we overcome the psychological weaknesses of human nature and operate in reverse, returning to our true selves? The method is actually very simple: we need to establish a scientific, reasonable, and effective trading system and strictly adhere to it. A good trading system should include—determining entry points, stop-loss and take-profit points, position management, and risk control rules. Only by strictly following the trading system can we overcome the psychological weaknesses of human nature and possess the operational foundation. Trading is a form of practice; only through continuous learning and reflection can we constantly improve and surpass ourselves!
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