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Booking wins early and dragging out losses — the habit that turns the curve upside down
Published by The Retail Trader · AUG 09, 2026 · Trading Psychology
Most traders' portfolios look the same: the good stocks have been sold, and the falling stocks are still sitting there. This does not happen by mistake. It is a deep behaviour called loss aversion.
Behavioural research is fairly consistent that an equal loss is felt more strongly than an equal gain. This means that accepting a loss is emotionally expensive.
That is why keeping a position open feels easy — as long as you haven't sold, it is 'only on paper'. This thinking is comforting and completely wrong. The position's value is real every day, whether you look at it or not.
The result of this is that people sell winning positions early (to lock in the gain) and hold on to losing ones (to avoid admitting the loss).
This is exactly the opposite of what works. Letting good positions run and cutting bad ones early — all of trading rests on this one line.
'So much has already gone in, what's the point of selling now' — this is the sunk cost fallacy. Money that is already gone should not be part of today's decision.
The right question is this:
• If I did not hold this position, would I buy it today at this price?
• If the answer is no, that is the reason to sell — even if you are in a loss.
• If the answer is yes, the reason to hold is your original thesis, not your entry price.
• The entry price is a number only you know. The market does not know it and does not care about it.
Write down the exit decision at the time of entry. At that time you are neutral. Making the same decision later is hard because the money is standing in front of you.
And if selling is painful, try selling half. A half exit is easier than a full exit for many people, and it often breaks the jam in which a position sits for months.
This article is for educational purposes only — it is not a buy or sell recommendation, makes no claim of guaranteed returns, and is not advisory. Rules, rates and mechanics change from time to time at the exchanges, SEBI and RBI, so verify every number yourself with your broker or an official source.