The House Money Effect is a dangerous psychological trap where traders take higher than normal risks after a big win, viewing the profit not as their own hard earned cash but as free money from the market.

🔸 The human brain tends to categorize money into different buckets. Principal is Hard-earned money (Must protect), while recent Profit is Bonus money (Free to gamble). The moment you take profit, that money 100% belongs to you. Throwing $1,000 of profit into a risky trade is just as foolish as withdrawing $1,000 from your savings account to gamble.

🔹 Typical Destruction Scenario:

  1. You score a massive win on a Meme coin or Futures trade, doubling your account.

  2. You feel Euphoric and think you are playing with the house money.

  3. You increase Volume, enter trades recklessly, or use extreme leverage for the next trade.

  4. The market reverses. You lose all the profits and even eat into your principal due to the frustration of wanting to win back the lost profit.

🔸 The Solution:

  • Move 50% of profits to a bank account or cold wallet. Turn screen numbers into real assets (spending, saving) so your brain recognizes their true value.

  • After a big win, stop trading for 24-48 hours. Return to the market with the mindset: My account balance is now the new baseline, not Principal + Profit.

Have you ever won big at the start of the month but ended the month in the red solely due to this House Money mindset?

News is for reference, not investment advice. Please read carefully before making a decision.