Prospect Theory: Why Traders Lose Money
Imagine this: You buy a stock at $100, feeling confident in your decision. Suddenly, the price drops to $90. You tell yourself, “It’s just temporary. I’ll wait for it to go back up.” But it keeps falling—to $80, then $70. Instead of cutting your losses, you hold on, hoping for a turnaround. Meanwhile, another trader buys the same stock at $100, sees it rise to $110, and immediately sells out of fear of losing their gains. Both traders are victims