Endowment effect: you liked your position

Imagine that you bought shares for 10,000 PLN. The price starts to drop, but you hold on because it will surely come back. A few days later, you are already down 2,000 PLN, and you still hold on because 'it will bounce back someday.' Such situations happen not only to you. Many traders lose thousands of PLN this way. It only takes one wrong move, one thoughtless attachment to a position, and suddenly your profits evaporate. Attachment to a trade is a silent killer of your portfolio. With each day of delay, your losses grow, and you still wonder why this is happening to you.

Attachment to our own positions is a result of the endowment effect - a psychological mechanism that makes what we own seem more valuable to us. When we invest, we start to view our decisions through the lens of personal involvement. In our minds, a resistance to loss arises because it is 'ours', and it is harder for us to let go of our own property. As a result, we cling tightly to even those positions that should have been closed a long time ago.

From the experience of many traders, it follows that attachment to positions leads to irrational decisions. Instead of acting according to logic and market reality, we choose to hold onto losing investments in the hope of a miraculous rebound. However, hope is not a strategy. Financial markets do not operate based on our emotions. When you hold a position just because you are emotionally attached to it, your decisions lose objectivity and become detrimental.

To break this cycle, implement a 'stop loss' rule. Before opening any position, determine at what loss you will close it and stick to that decision, regardless of emotions. Develop an exit plan and train your discipline to adhere to it no matter the market situation. A stop loss is your protection against emotional decisions. Remember: it is better to close a position with a small loss than to let it escalate into huge costs. This way, you will gain control over your portfolio and stop being a victim of your own emotions.

New week?

Every morning, set your limits: profit, loss, time. Stick to the plan, regardless of emotions.