Sunk cost and the trade that must be saved
Posted: Fri Oct 30, 2026 6:30 am
Hours spent researching a pair, a perfect setup, a long wait for the signal. Then the trade goes wrong, and part of the mind says that all that effort deserves a rescue.
That's the sunk cost fallacy. Time and effort already spent are gone, and they don't change the odds of the next tick.
It shows up in behaviours like adding to a losing position, hoping for a bounce that justifies the earlier entry, or refusing to close because closing makes the loss real.
A practical antidote is a pre-trade statement of what invalidates the idea. Write it down: if price closes below this level, the setup is wrong. When that happens, closing is simply following the plan.
Another is a post-trade question: if this had been a stranger's trade, what advice would be given?
Time spent waiting for a setup is also sunk. Patience that ends in a loss was still the right process, and the wait is not a debt the market owes back.
What invalidation rule was written before the last losing trade?
That's the sunk cost fallacy. Time and effort already spent are gone, and they don't change the odds of the next tick.
It shows up in behaviours like adding to a losing position, hoping for a bounce that justifies the earlier entry, or refusing to close because closing makes the loss real.
A practical antidote is a pre-trade statement of what invalidates the idea. Write it down: if price closes below this level, the setup is wrong. When that happens, closing is simply following the plan.
Another is a post-trade question: if this had been a stranger's trade, what advice would be given?
Time spent waiting for a setup is also sunk. Patience that ends in a loss was still the right process, and the wait is not a debt the market owes back.
What invalidation rule was written before the last losing trade?