The truth is, Human decision-making is wired with a built-in strong fear of losses<\/strong>, and that psychology has a huge impact on how we make trading decisions.<\/p>\n The theory that explains this phenomenon is called Prospect Theory<\/strong>.<\/p>\n Prospect Theory is a decision-making model based on the idea that<\/p>\n\u201cpeople are much more sensitive to losses than to gains, and try hard to avoid losing.\u201d<\/span>\n Gains \u2192 The feeling of happiness isn\u2019t that strong It\u2019s said that this emotional impact of losses is about twice as strong<\/strong> as that of gains.<\/p>\n This whole chain of behavior is what creates the In other words, Our urge to avoid losses is constantly at work in our daily lives.<\/p>\n And our trading decisions are simply an extension of that same mindset.<\/p>\n Pain from losses >> pleasure from gains \u2192 You end up cutting your losses too late<\/p>\n You fixate on your entry price<\/strong>\u00a0as the reference point \u2192 You can\u2019t bring yourself to accept the loss<\/p>\n As the loss grows, your sense of it becomes numb \u2192 This leads to the \u201cI\u2019ll just wait until it comes back\u201d mindset<\/p>\n If you only start thinking about cutting losses after<\/strong> you\u2019ve entered, your emotions are already in control.<\/p>\n \u2192 Set your stop level before<\/strong>\u00a0entering and place the stop order in advance.<\/p>\n Example\uff09<\/p>\n Take-profit: +30 pips<\/p>\n<\/li>\n Stop-loss: -15 pips Why did you take profit there?<\/p>\n<\/li>\n Why couldn\u2019t you cut the loss? The goal is not to erase your emotions, but to build a structure where your emotions simply can\u2019t interfere.<\/p>\n That is the only real way to break out of the \u201csmall gains, big losses\u201d cycle.<\/p>\n To overcome the \u201csmall gains, big losses\u201d pattern, what you need is not mindset talks or willpower, but a stack of repeatable, backtested results.<\/span>\n Why did you enter there?<\/strong><\/p>\n<\/li>\n Why did you delay cutting the loss?<\/p>\n<\/li>\n Why did you rush to take profit?<\/p>\n<\/li>\n<\/ul>\n You only start to really see the answers when you check whether these decisions can be reproduced on past charts<\/strong>.<\/p>\n To avoid being beaten by your emotions, you need to uncover solid, evidence-based patterns<\/strong>\u00a0with your own hands \u2014 not just rely on experience.<\/p>\n ForexTester is a dedicated piece of software that lets you replay and backtest past market data at your own pace.<\/p>\n Play, pause, and rewind charts for any period you like<\/p>\n<\/li>\n Run tests while manually placing your own trades<\/p>\n<\/li>\n Objectively spot your own habits in entries and stop losses<\/p>\n<\/li>\n Discover winning patterns by yourself<\/strong><\/p>\n<\/li>\n<\/ul>\n The problem of \u201cnot being able to cut losses because of emotions\u201d<\/strong> is very hard to notice in live trading.<\/span>\n With backtesting \u201cSmall gains, big losses\u201d<\/strong> is not about talent \u2014 it\u2019s a pattern problem.<\/p>\n Market conditions where you tend to cut losses late<\/p>\n<\/li>\n Situations where you take profit reflexively<\/p>\n<\/li>\n Setups you can hold with real confidence<\/p>\n<\/li>\n<\/ul>\n All of these will inevitably become visible once you start backtesting.<\/p>\n First, from this very moment, take one step to make your own trading visible<\/strong>.<\/p>\n
\nthis is not because you're a bad trader or because you're mentally weak.<\/span>\nWhat is Prospect Theory for Traders?<\/h2>\n
\nLosses \u2192 The feeling of pain is very intense<\/p>\nWhy does the \u201csmall gains, big losses\u201d pattern happen?<\/h2>\n
\n\n
\n Market conditions<\/strong><\/td>\n Actions to take<\/strong><\/td>\n Psychology<\/strong><\/td>\n As a result,<\/strong><\/td>\n<\/tr>\n \n Unrealized gains<\/td>\n Take profits early<\/td>\n I want to lock in even small profits.<\/td>\n profits do not grow<\/strong><\/td>\n<\/tr>\n \n Unrealized losses<\/td>\n Delay cut losses<\/td>\n I don’t want to lock in losses.<\/td>\n losses grow<\/strong><\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n
\n\u201csmall gains, big losses = the classic blow-up at the end\u201d<\/strong>\u00a0pattern.<\/p>\n
\n\u2018Small gains, big losses\u2019 is not the result of poor trading skill, but basically a built-in feature of human psychology.<\/span>\nLoss Aversion Showing Up in Everyday Life<\/h2>\n
\n\n
\n Scene<\/strong><\/td>\n Behavior<\/strong><\/td>\n Emotions<\/strong><\/td>\n<\/tr>\n \n Limited-Time Sale<\/td>\n Buying even when not necessary<\/td>\n “If it slips away, it’s a loss”<\/td>\n<\/tr>\n \n Points<\/td>\n Unnecessary spending<\/td>\n “If it disappears, it’s a loss”<\/td>\n<\/tr>\n \n Term Insurance<\/td>\n Excessive subscriptions<\/td>\n “I’m afraid of what might happen”<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n Three Internal Factors Behind the \u201cSmall Gains, Big Losses\u201d Pattern<\/h2>\n
\u2460 Loss aversion<\/h3>\n
\u2461 Reference dependence<\/h3>\n
\u2462 Diminishing sensitivity<\/h3>\n
Practical Ways to Break the \u201cSmall Gains, Big Losses\u201d Pattern<\/h2>\n
1. Decide your stop loss before you enter<\/h3>\n
2. Fix your take-profit and stop-loss distances<\/h3>\n
\n
\u2192 Just by fixing your risk\u2013reward ratio like this, you can flip the \u201csmall gains, big losses\u201d pattern on its head.<\/p>\n<\/li>\n<\/ul>\n3. In your trading journal, write down your **emotions**<\/h3>\n
\n
\n\u2192 Repeatable improvement always starts with becoming aware of your emotions.<\/strong><\/p>\n<\/li>\n<\/ul>\nSummary: How Prospect Theory Relates to Traders\u2019 \u201cSmall Gains, Big Losses\u201d Pattern<\/h2>\n
\n\n
\n Key Points<\/strong><\/td>\n Contents<\/strong><\/td>\n<\/tr>\n \n Slow and steady, big and steady is not a personality trait, it’s a psychological trait.<\/td>\n Prospect theory is the cause<\/td>\n<\/tr>\n \n Loss aversion leads to small gains and large losses.<\/td>\n The intensity of pain distorts judgment<\/td>\n<\/tr>\n \n To overcome this, you need to “set rules in advance.”<\/td>\n Fight with systems, not emotions<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n<\/div>\n<\/div>\n In trading, you don\u2019t win with \u201cemotion\u201d \u2014 you win with \u201crepeatability\u201d<\/h2>\n
\n
That\u2019s where \u301dForexTester\u301f comes in<\/h2>\n
\ud83d\udd25 What you can do<\/h3>\n
\n
\u2728 Why it\u2019s especially powerful against the \u201csmall gains, big losses\u201d pattern<\/h3>\n
\u2192 You can filter out emotional influence and stack up only correct decisions<\/strong>.<\/p>\nStart by getting to know \u301dyour own habits\u301f<\/h2>\n
\n
For those who \u201cwant to change right now\u201d<\/h2>\n
![\"\u30d5\u30a9\u30ec\u30c3\u30af\u30b9\u30c6\u30b9\u30bf\u30fc5\u306eVIP\u30c7\u30fc\u30bf\u81ea\u52d5\u66f4\u65b0\u3092\u89e3\u7d04\u3057\u3066\u7121\u6599\u3067\u4f7f\u3044\u7d9a\u3051\u308b\u65b9\u6cd5\"](\"https:\/\/fx-vhouse.com\/wp-content\/uploads\/2023\/10\/ft5_\u30d0\u30ca\u30fc_320-320x290.png\")
<\/figure>