Question: You could receive $100 right now or flip a coin with a 50/50 chance of winning $200. Which do you go for?
Think of an answer before reading further.
Now. You have the choice of definitely losing $100 or flipping a coin with a 50/50 chance of losing $200. Which option do you take?
If you answered both questions the same way, congratulations, you have a rational attitude toward gains and losses. That’s good news if you’re a trader.
Studies show that most people will pick receiving $100 while opting to take the chance of losing $200 or nothing. It’s called loss aversion and it’s because negative reactions to loss impact our psyches twice as hard as the rush of making gains does.
Master that psychological part of trading and you’re one step closer to being the trader you want to be.
Here is how to tell if you're a trader or a gambler
