Why Traders Freeze: The Psychology Behind Not Cutting LossesFirst up: let’s address the elephant in the room. Loss aversion — that great human flaw. From the moment your ancient ancestor decided to poke a saber-toothed tiger to see what happens, the brain has been hard-coded to avoid pain at all costs.
Loss aversion is literally in your DNA — studies show people feel the sting of a loss twice as intensely as the pleasure of an equivalent gain.
When you see that trade slip into the red, your rational brain may say, “Cut it, the setup is invalid, live to trade another day.” But your emotional brain — the one still grunting in a cave — is screaming, “It might come back! Hold! HOOOLD!” So you sit, frozen.
🌱 Hope: The Most Expensive Four-Letter Word
Hope is the silent killer of trading accounts. You think you’re being patient as you decide to give the trade “room to breathe.”
But what you’re really doing is outsourcing your exit strategy to technical tools, news headlines, and anything that’s not your own choice, hoping something will rescue your losing position.
This is how tiny losses can turn into portfolio ruin. Just ask anyone who’s held a small-cap memecoin down 90% because the “team has potential.”
🧊 Analysis Paralysis: When the Chart Becomes a Maze
Another reason traders freeze? Overanalysis. One bad candle and suddenly you’re toggling between the 1-minute, 5-minute, and daily chart like you’re hacking into the Pentagon. And your trendlines? You’re probably drawing them wrong .
More data rarely leads to more decisive action. It just feeds your brain conflicting signals until you’re convinced you see a bounce that isn’t there. Meanwhile, the loss grows. And grows. And then you’re back to hope. Rinse, repeat.
😬 The Ego Monster: Admitting You’re Wrong
Here’s the harsh truth: cutting a loss means admitting you were wrong. For traders, whose entire identity can hinge on being “smart money,” that feels like public humiliation. The ego monster wants you to be right more than it wants you to be profitable.
So instead of taking the small L, you’ll cling to the trade because closing it out would force you to look in the mirror and say, “I was wrong and I need to do better.”
🏴☠️ From Risk Management to Revenge Trading
Once you’ve frozen long enough, you reach the next stage of the bad-losing cycle: revenge trading . Now you’re not just trying to recover your loss; you’re out to punish the market for “taking” your money.
Spoiler alert: the market doesn’t know you exist, and it certainly doesn’t care. Maybe this is the gambler’s mindset disguised as a “strategy?”
📉 Blame the Tools? Not So Fast
Some traders love to blame outside factors like the Economic calendar or their indicators when they freeze. “My RSI didn’t signal this! The MACD betrayed me!” Indicators are just tools — they don’t make decisions for you. You do.
Hiding behind tools means you refuse to take accountability. It’s a convenient excuse that can keep you stuck in the same losing habits. Better to master the one tool that matters: your discipline .
✂️ The Beauty of the Hard Stop
All hail the hard stop — the trader’s seatbelt. It’s not attractive, it’s mechanical, but it’s often the only thing standing between you and a potentially blown-up account.
The reason some traders can survive the market for decades isn’t because they’re never wrong — it’s because they’ve learned to make their stops non-negotiable.
A stop-loss is you telling your brain, “Hey, I’m not smarter than the market, so I’ll automate the decision before I get emotional.” It takes the agony out of cutting a loss because you’ve already decided on the outcome before your lizard brain can intervene.
⚖️ Small Losses Are the Cost of Doing Business
Want to feel better about cutting that loss? Think of it as your tuition fee. Every trader pays a certain cost to the market — it’s the cost of playing the game. No one gets every trade right. The pros just get better at losing small.
Those big-shot money spinners you look up to? They didn’t build their empire by never losing. They’re pros at getting out when they’re wrong. The difference between a pro and a blow-up isn’t the winning trade — it’s the ruthless discipline on the losing ones.
🧘♂️ Finding Comfort in Discomfort
There’s no magic trick to make loss-cutting feel good. It always stings. But you can train your brain to see a small loss as a win for your long-term survival. Write it down. Journal the trade . Log the emotion. Over time you’ll realize that the trades you exit early rarely haunt you.
🏁 Face the Fear, Keep the Account
And finally, freezing in front of a loss doesn’t protect you — it likely means you’ll pay more than you should. Next time your gut says, “Maybe it’ll come back…” ask yourself: “Do I want to be right, or do I want to trade another day?”
Your job is to trade well and stay in the game for as long as possible.
Your turn, traders : what’s your biggest “should’ve cut it sooner” horror story? Drop it below — we promise not to say we told you so.
Cuttinglosses
Cut loss point for HammerBuy on yesterday hammer.
Today price break below the yesterday low.
How to positioning yourself?
When stock break the low point, sell your stock .. if it bounce back above the low .. buy back again. (Spring strategy)
You can wait for end of the day just decide, but the price may continue to going way lower. Therefore it is preferable to cut now and buy back later.
An important lesson: bad traders and investorsThere so many random people starting hedge funds & all they have to do is shadow the market and voila, you are a millionaire (this is 100% true), in a batch of thousands of people some are going to be lucky - simply a normal distribution - and get better results and end up billionaires instead of millionaires.
They are certainly good at marketing and presentation all that stuff to attract dumbvestors.
Alot of people that really know this business say that 95% - or more - are complete frauds. I mean, at least they are able not to lose money.
The cool thing is they have alot of money, and this money is ripe for the picking. They almost always underperform indices, and bring so much cash in, I think in late 2017 they had over 800 billion usd into stocks. Bringing plenty of volatility and volume, so easy to just ride on their backs when something strats trending then they follow the momentum and push it strongly...
So today, let us look first at Bill Ackman. This guy became a billionaire somehow, probably just what a random normal distribution does, and he was bullish on valeant pharmaceuticals at 200$. Now what did it look like back then?
Looks like a complete bubble. He is probably one of these guys that does not believe in TA.
But any way you look at it you can clearly see it lost momentum, and it looks like a bubble.
There was 1 small support and that is it. The price skyrocketed, of course there is a strong possibility it just skyrockets down...
What did he do? Buy "the dip" at 200$, then he refused to sell because "it cannot go lower I am sure about this" and he even BOUGHT MORE "cheap" as the thing was going down. He wanted to hold it "for the long term" but under pressure and to convince investors he had not entirely lost his mind he ended up selling at something like 10-15$. Cringe.
His fortune was over 2 billion, and now he only has 1 left. He used to be called "baby Buffet". No more. People just do not understand normal distributions.
Second story.
"Vadim Perelman was a young hedge fund hot shot not so long ago, overseeing a portfolio in the hundreds of millions at the age of 31, hopping on corporate boards, and issuing lengthy slide presentations about his favorite stock picks. But then Perelman placed an enormous bet on a single company, Walter Investment Management."
Translation: Freshly out of school nerd started with wins due to how normal distribution works. He ended up with hundreds of millions quickly. And he probably considered himself a "legend". The new Warren Buffet, the genius of finance that would reinvent trading.
Let's look at the story. I cannot find the chart in trading view so it is going to be all text.
Trading legend and young prodigy Vadim Perelman hedge fund was the largest shareholder of Walter Investment Management in June 2015 when the share was quoted 23$.
Perelman’s U.S. stock portfolio has gone from $854 million in 2013, including the notional value of a large number of options, to $35 million in September 2016, SEC filings show.
Trading legends never cut losses...
THIS
ACTUALLY
HAPPENS
IN
REAL
LIFE
REALLY????
There are so many examples, but I had enough for now.
So not be one of those. Trading is easy, seriously, but some qualities are required, such as IF you go all in on something (why?) do not let it drop 95% before getting out. Or in other words, the quality of not being a complete moron.
Nothing warms my heart more than watching an arrogant fool that gets lucky and thinks he is this superhero get struck by reality and fall face first on the hard ground. If they get angry it is even better. An amazing treat.
On the flip side you might get the one that is really good but starts with bad luck, but I doubt that happens often...
I just cannot believe all these "common errors" of trading I keep hearing all the time... but then I see experienced educated professionals make them... what is this? Really?
"Oh I cannot just open a trade and forget about it or just follow my rules" why? why? People are broken lmao.
Avoid all these dumb mistakes never cutting losses not being disciplined overtrading FOMOing etc and seriously it's basically impossible not to make money trading.
Maybe I'll teach a dog or a 5 years old one day.
Oh I think Dan TheChartGuys daughter knows how to make money and she is 10. Not sure but I think that is what I heard.
Now that the crypto bubble is over, I will miss seeing a new "legend" pop out of nowhere get a lucky streak of 3-4 winners once every 3 days, call himself the son of god himself, blow up and disappear.
People that are interested in trading - I think - are less dumb than alot of the people that appear during bubbles such as crypto.
In all seriousness, I hope this never changes, thousands of morons playing with hundreds of billions of dollars, booooii I'm feeling tingles as I type this, the potential to rob them is enormous. For someone addicted to charts and that learns new things every day. Luckilly I am one of those.
I CANNOT WAIT for my trading week to start, see some fear, see some panic selling and buy these dips then run away with their money.