Trading Psychology Series 001

Why Do Investors Close Winners Too Early? 🧠💸

One of the most common mistakes I see, especially among new investors (less than 5 years), is the urge to close a position as soon as it turns positive.

This also applies to copiers, who have weathered the storm, and endured a seemingly significant drawdown. As soon as the copy hits green - They leave, not realizing, they are on the rocketship. 🚀 All those positions have been taken to give the best results, over the long term. Yet, people get out on the ground floor.

The temptation is huge, I know: lock in that small profit, feel good, and move on. But is this really the best strategy for long-term growth? Let’s dig into the psychology behind this and why letting your winners run is so important.

The Disposition Effect: Cutting Winners, Holding Losers

Behavioral finance calls this the "disposition effect": the tendency to sell assets that have gained value, while stubbornly holding onto losers, hoping they’ll recover. Why? It’s all about emotions. When you see a profit, your brain wants to protect it. It could always turn negative again, causing you stress. But this fear-driven reaction often leads to smaller gains and missed opportunities for bigger profits. For example, $SMCI (Super Micro Computer, Inc)

It's a reasonably simple, yet essential business, that went through turmoil recently. They are coming up again, and recently, positions (and sentiment) turned positive. I am convinced it can go much higher, so holding on to them!

There is a really simple test to decide whether to cut the losers or wait for a recovery.

Just ask yourself the simple question:

If you didn't have any positions in that asset. Would you buy it now, at the current price? If your answer is yes, then hold. If no, cut.

Why do we cut winners then?

👉 Fear of Losing Gains: Our brains are wired to notice threats (like a profit turning into a loss) much faster than rewards. This triggers a “fight or flight” response, making us want to close winners quickly to avoid regret.

👉 Cognitive Dissonance: Selling a loser means admitting you were wrong. Holding on lets you keep hoping you’ll be proven right, even when the odds are against you.

👉 Instant Gratification: That rush of closing a green trade feels good temporarily. But it can sacrifice your long-term results.

Let Your Winners Run!

The most successful investors do the opposite: they cut their losses quickly and let their winners run. This is how you get those outsized gains that really move the needle for your portfolio. Remember, nobody ever built real wealth by taking tiny profits and letting losses pile up.

Proud of My Copiers - Especially During the recent Turbulence!

Shout out to those who joined me in the last two months, right in the middle of the market turbulence! 📉📈 This is where real money is made. Volatility shakes out the weak hands, but those who stay disciplined and stick to a proven strategy are rewarded when the dust settles.

Current plans:

👉 Reduce crypto portfolio in the next 6 months, keeping the best. $XRP (XRP) $BTC (Bitcoin) $ADA (Cardano)

👉 Keep some cash for opportunities. $UNH (UnitedHealth) is building up to be a decent contrarian play

👉 Keep my winners running!

If you want to avoid the emotional rollercoaster and make smarter decisions, consider copying an experienced investor, who’s been through rough markets a couple of times. I do the research, manage the risk, and let the winners run - so you don’t have to!

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💚 Invest smarter, not harder—copy my trades and watch your portfolio grow! 🚀

✅2023 - 54.58%

✅2024 - 54.1%

Gabor Fogarasi @fogi70

eToro Popular Investor 🏦

CISI Level3 Investment Certification

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