The more you earn, the easier it is to lose it? Investment traps in human nature
Many people think that the biggest problem in investment is stop loss. But in fact, more people make the most wrong decisions when they are making money.
There is a famous phenomenon in behavioral finance called "disposition effect"
When we make money from investment, we are often eager to lock in the profits and rush to stop profits. On the contrary, when we lose money, we are reluctant to admit the loss and insist on waiting for the market to turn around.
Why is this so?
Because the human brain reacts more crazily to "making money" than "losing money". When you see your account doubled, your brain's reward circuit is like chicken blood, and dopamine soars.
It makes you excited, confident, and even feel that you are in control of the market.
The result?
Selling good targets in advance despite planning to hold for a long time. Looking at the money earned, you can't wait to rush into new transactions.
The more you earn, the more you want to hold a large position, and you may lose all your previous profits in the end.
Studies from Harvard, University of Chicago and other institutions have shown that:
In a profitable environment, investors' over-trading rate increases significantly, while the average rate of return is lower.
Some studies have also pointed out that when making money, the proportion of investors making wrong trades may be several times that of losing money.
This is why experts often say:
"The real difficulty is not to stop loss, but to hold on to profits."
Every time an account doubles, it is not just a number that gets bigger, but also a game between the brain and dopamine.
The next time you make money, you might as well ask yourself:
Do you want to sell because the market gives a signal?
Or is it because the dopamine in your brain is playing tricks?
Investing is not just a game with the market, but also a game with your own dopamine.
