The Trader's lab : EP.19 - Overvaluing Your Own Trades

Why is it so hard to close a losing trade?

The culprit is often the Endowment Effect, a cognitive bias where traders irrationally overvalue positions simply because they own them. This psychological trap blurs the line between "Market Value" and "Personal Value," causing you to ignore bearish news and hold onto losers until it’s too late. Remember, a 50% loss requires a 100% gain just to break even. To survive, you must detach your ego. This summary introduces the best strategy to cut losses without regret: the "Re-Entry Test." Ask yourself, "Would I buy this asset today at this price?" If the answer is no, sell immediately. Learn to treat losses as necessary business costs and maintain your objectivity on IUX.