Trading Success Secrets: When Sunk Costs Surface
Traders and investors suffer the two most common wealth-robbing afflictions: greed and fear.
However, human frailties are much more complex than just those two obvious manifestations of wanting and needing. Those complexities include a range of misperceptions, misidentifications, and mental lapses.
These slight, but identifiable mistakes can lead to trading losses, or the failure of the trader to fulfill his or her full portfolio success.
One of those misperceptions is referred to as “sunk cost” and here’s how it can affect trading performance.
Sunk costs are losses that are incurred that can’t be recovered. For investors or traders, that can mean that they have taken a position that is now at a lower price than when they began it.
However, traders are often fooled by thinking they can’t recover any of the cost when, in fact, the position may retain some value. But, in numerous cases, traders never sell; they hold onto positions because they have mentally written off the loss.
So, the losses are compounded because not only does the bad investment stay, but the money is never placed in winning trades.
A few of these “sunk costs” can sink a portfolio. (And these human trading errors are reasons why Online Investing AI exists.)
Most experts would say the best strategy is to drop the position, take that investment and place it in an asset with more profit potential.
Related posts:
- Trading Success Secrets: Overdosing on Opinions
- Trading Success Secrets: The Good Times Roll Must End
- Why Automated Trading And Manual Trading Are Compatible
- Secrets AI Teaches Us About Over-Thinking And Over-Trading
- What are the Differences between Human Trading and Automated Trading?
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