Luke Mason K330_ Baker#52

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What is sunk cost fallacy in forex trading?

Sunk cost fallacy occurs when traders stick with losing trades because they’ve already “invested too much.” For example, doubling down on EUR/JPY despite mounting losses, hoping to justify earlier decisions. Institutions avoid this by treating each trade independently. Retail traders often escalate exposure instead of cutting. Benefits: psychological comfort of persistence. Risks: catastrophic blowups. The solution is discipline: evaluate trades on current merit, not past costs. Sunk cost fallacy reveals that emotional attachment to past actions is dangerous—trading success comes from flexibility and detachment.