Losing feels larger
At the same amount, losing hurts more than gaining pleases. That makes realising a loss unusually hard. Not selling feels like not having lost yet, but the account is worth the same whether you sell or not. It is easy to miss that choosing not to sell is itself an active decision to keep holding.
Why winners get sold first
Selling profitable positions quickly to lock in gains while holding losing ones waiting for recovery is a repeatedly observed tendency. Doing so removes what is working and leaves what is not. The problem is that the basis for the decision is your purchase price rather than the outlook for the holding.
You see what you want to see
After buying, information confirming the decision registers more easily. Contrary information looks weakly supported, and you gravitate toward opinions on your side. This is not a matter of willpower but a basic tendency in how people process information. Deliberately seeking and writing down the counter-case is the response that works.
- Loss aversion: realising a loss is unusually hard
- Disposition effect: winners get sold first
- Confirmation bias: only supporting information accumulates
- Hindsight: afterwards it feels like you knew
The comfort of the crowd
Many people doing the same thing is not evidence that the judgement is correct, yet it is reassuring. Watching something rise quickly creates a sense of missing out, and that sense peaks when the price has risen most. That is the structure by which the latest entrants are hurt worst.
Deciding in advance rather than removing emotion
Trying not to feel does not work. Setting criteria before the feeling arrives does. Writing down why you bought, what would show the judgement was wrong, and the maximum allocation means comparing against what you wrote rather than how you feel. This explains common biases; it does not address any particular holding or moment.
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