Sunk Cost in Open Positions: The Entry Price Does Not Matter
Posted: Mon Oct 26, 2026 1:44 pm
A position that has been open for an hour, survived a drawdown, and consumed real attention begins to feel like an investment that deserves protection. That feeling is the sunk cost fallacy at work. Time and effort already spent cannot be recovered by staying in the trade.
The market has no knowledge of the entry price. Whether a trade is worth holding depends only on what price is likely to do from the current level, relative to the risk of staying. That question has the same answer for a trader already long and one considering a fresh entry.
A useful test is to ask whether a new position in the same direction would be opened right now, at the current price, with the current stop. If the answer is no, the justification for holding is mostly emotional, tied to the past rather than to the setup.
Pre-defined invalidation levels support this discipline. When the reason for the trade is written down before entry, its failure is a factual event, not a personal defeat, and exiting becomes a routine action.
The market has no knowledge of the entry price. Whether a trade is worth holding depends only on what price is likely to do from the current level, relative to the risk of staying. That question has the same answer for a trader already long and one considering a fresh entry.
A useful test is to ask whether a new position in the same direction would be opened right now, at the current price, with the current stop. If the answer is no, the justification for holding is mostly emotional, tied to the past rather than to the setup.
Pre-defined invalidation levels support this discipline. When the reason for the trade is written down before entry, its failure is a factual event, not a personal defeat, and exiting becomes a routine action.