Loss Aversion

Loss aversion is the well-documented tendency for the pain of losing money to feel more intense than the pleasure of gaining the same amount, a core finding of behavioral economics research by Daniel Kahneman and Amos Tversky. Studies have suggested losses can feel roughly twice as psychologically powerful as equivalent gains.

Loss aversion drives several common trading mistakes: holding losing positions too long hoping to "get back to even" instead of cutting the loss, and selling winning positions too early to lock in a gain before it can turn into a loss, even when the underlying analysis hasn't changed.