Loss aversion is an old human instinct wearing modern clothes. Long before charts, portfolios, and price alerts, survival depended more on avoiding loss than chasing gain. The perception behind that is losing food, shelter, safety could mean the end, while missing out on a potential reward was merely disappointing.
That bias stayed with us.
I've noticed myself sliding more towards being highly loss averse as of late, especially with trading and matters of investment. I want to risk as little as possible and gain as much as possible per trade. I think my fear receptors are firing up at the mere thought of capital erosion.
On the flip side, greed has taken a backseat, since most of the gains are looked at in an almost disinterested manner. Kind of like it's a mirags and may just disappear back into the ether for reasons outside of my control.
Drawing the line on the normalness of this behaviour, I'm not sure how normal such a way of aversion to loss is, as there's obviously a limiting belief that losses are not only bad, but they can't be regained back especially in this context of financial loss.
I think this is where I've crossed from healthy caution into something more paralyzing, given the perception that a loss is permanent and gains are fragile and temporary.
Money as a barometer for gain/loss is also a charged emotion in what it enables one to do and not do. The ability to make choices freely versus feeling trapped by constraints.
Also, even though it's just numbers on the screen, losing "money" is like losing control over one's future, the buffer against ever present uncertainty and possibilities one hasn't even imagined yet.
Of course, it's a stretch to give this much power to something that's really just a social agreement we've all decided to believe in.
Maybe this new awareness of heightened fear means something shifted recently that I've not yet come to terms with yet, actual losses that stung more than I admitted, or just life circumstances making financial security feel more crucial than before.
I'm wondering if this mindset is bleeding into other areas too, making me avoid risks beyond just trading. So far, my curiosity is still pushing me towards challenging myself in non-financial ways, at least I haven't shut down completely.
Now, what I need to figure out is whether I'm being rationally cautious or if I've developed a belief system where every financial decision feels dangerous because I can't trust good outcomes to last.
The latter doesn't seem true when measured against the the long term belief that 'm still highly optimistic of markets trending higher as they always do. Maybe just having a bad streak, and this too shall pass.
Thanks for reading!! Share your thoughts below on the comments.
