Have you ever experienced this: watching your holdings decline, unwilling to cut losses, always thinking "Just a little more, and I’ll break even"; but as soon as there's a small profit, you become nervous and close the position, fearing the gains will disappear? This isn’t because you’re unprofessional, but due to a psychological curse called "loss aversion."

Loss aversion, simply put, means that the pain of losing money far exceeds the pleasure of gaining it. How much more? Psychological studies show that the negative impact of a loss is about 2 to 2.5 times greater than the positive impact of an equivalent gain. To put it another way, if you lose 100 dollars, you need to earn 200 to 250 dollars to truly feel better.

This phenomenon manifests clearly in trading. First is the issue of "holding on"—when the price drops, instead of cutting losses, you hold tighter, thinking "the market will reverse, I just need to endure a little longer." The result? Small losses turn into big losses. On the other hand, as soon as there's a profit, you’re eager to sell, afraid that the gains will evaporate instantly. Some buy-in at a 10% increase and close the position, only to see it double later—that feeling is hard to describe.

Even more painful is the obsession with cost basis. Many people consider their purchase price more important than anything else—"I’ll wait until I break even." But does the market care about your buy-in price? For projects with deteriorating fundamentals, you keep holding on just because "you haven’t cut your losses." In the end, what could have been a timely stop-loss turns into a deep hole.

From a neurological perspective, this is because when you experience a loss, your amygdala activates wildly, triggering an instinctive fear response, which completely suppresses your rational prefrontal cortex. Your body and brain are telling you "don’t lose," and at this point, even the most sophisticated trading strategies can be disrupted.