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I have a serious problem: I don't take a loss
- Thread starter BPtrader
- Start date
Quote from LoveOfProfit:
"Conversely people strongly prefer risks that might possibly mitigate a loss (called risk seeking behavior)."
Not cutting your losses is exposing yourself to more risk, because they prefer to take the chance that the stock will turn around than to cut their losses.
It's this very risk seeking behavior which stems from loss aversion that explains why many people can't accept a loss.
If you still don't understand,
It is you who don't understand.
To explain a behavior (let loss grow) with another behavior (risk seeking) is not acceptable. This is equivalent to explaining a medical symptom (e.g., coughing) with another symptom (e.g., sneezing).
In my words, you cannot explain an effect with another effect. You must explain an effect with a cause.
But again, you don't know the cause, hence your ignorance.
Quote from LoveOfProfit:
I don't think he does. Clearly Wikipedia is already more than a match for his reading comprehension skills.
I don't read wikepedia when it comes to scientific research. I read loss aversion when I was a student long time ago, most of the those social psychology "theories" are merely repackaging of basic psychological theories. Those social psychologists simply add a few laymen's terms to make a "theory" appealing to the public. Most social science theories can be traced back to ideas of 2000 years ago.