Sunk cost in a two-pip loser
Posted: Sat Oct 31, 2026 9:02 pm
Two pips against and the position looks fixable. Surely it will come back. A minute later it is four pips against, and giving up now seems wasteful.
The sunk cost bias applies even to tiny amounts. The loss already incurred feels like a reason to stay in, even though the market owes nothing for it.
The real calculation is forward-looking. The question is whether the current position has positive expectancy from here. Past losses are irrelevant to that calculation.
Practical defenses include a hard stop placed before entry and never moved against the trade, and a time stop that exits if the trade has not worked within a set number of minutes.
Another is making the stop a mechanical order, not a mental one. A mental stop invites negotiation. A stop in the system just executes.
It also helps to track the average loss when stops are respected versus when they are moved. The difference is usually striking.
What is the rule that prevents a small loser from growing?
The sunk cost bias applies even to tiny amounts. The loss already incurred feels like a reason to stay in, even though the market owes nothing for it.
The real calculation is forward-looking. The question is whether the current position has positive expectancy from here. Past losses are irrelevant to that calculation.
Practical defenses include a hard stop placed before entry and never moved against the trade, and a time stop that exits if the trade has not worked within a set number of minutes.
Another is making the stop a mechanical order, not a mental one. A mental stop invites negotiation. A stop in the system just executes.
It also helps to track the average loss when stops are respected versus when they are moved. The difference is usually striking.
What is the rule that prevents a small loser from growing?