Sunk Cost Trap: Wrong direction but refusing to admit it – who is stopping you from cutting losses?

📉 After opening a position, the market runs in the opposite direction and you are already down 20%.

"Wait a little longer, maybe it will retrace."

"I've already lost so much, closing now would be too much of a loss – I'll just hold through!"

Result: position liquidated, gone to zero overnight.

This is the sunk cost trap: you are unwilling to admit you were wrong because you have already invested capital.

Why is it so hard to cut losses?

Because cutting losses means "admitting you are a fool." Humans are inherently averse to self-denial.

How to break the trap?

1️⃣ Treat losses as "operating costs": Opening a restaurant requires paying rent; trading contracts requires paying stop-losses. A stop-loss is not a failure; it's a necessary cost of doing business.

2️⃣ Set a stop-loss at the moment you open a position: Place the stop-loss order at the same time you enter the trade. Let the machine execute it for you – don't test human nature.

3️⃣ Ask yourself one question: "If I were flat right now, with the current price and trend, would I still open a long position?" If the answer is no, close the position immediately.

💡 Today's quote: Cut losses and let profits run. Holding through is the most expensive hobby in futures trading.