Why Traders Hold On To Losers

Traders enter into their trades based on some conviction. They anticipate a trade will go up or down towards their expected outcome. Sometimes, there can be a violent reaction in the market which sends this analysis for a toss. Watching their trade rush into negative territory, traders become frozen. This happens due to two main reasons.

Traders refuse to accept that their forecast on the trade was wrong. It is hard on the ego to take a hit, and to acknowledge that one made an error or judgment. If they exit the market now, their loss will be crystallized and forever remind them of their blunder. They look at the reasons of their trade and want to justify them at any cost. Instead of cutting their losses and getting out, they stick with their decision.

The second reason that they fail to exit the market is hope. Traders just cannot come to terms with the fact that they were wrong to enter the trade in the first place. They justify their Straddle Trader Pro decision by staying in the trade and hoping it will turn around. They fool themselves into believing that the market will validate their decision to trade. They have fallen in love with the trade and cannot accept the fact that it is being hammered right in front of their eyes.

When they eventually do realize their folly, it is always too late. They will lose much more than they can afford.