Regret aversion—honestly, you don’t dare to stop out not because you think it will go up, but because you’re afraid that after you stop out, it really does go up.
Regret aversion—“What if it rebounds after I stop out?”—is this line what kept you holding through your deepest losing trade?
📖 This episode’s entry: Regret Aversion (Regret Aversion)
🎯 Difficulty: ⭐⭐ (advanced beginner)
🔥 Emotional danger index: 🔥🔥🔥🔥 (Level 4)
❓ What is this (plain-language definition)
When you make decisions, the primary goal isn’t “to make the most money,” but “to avoid future regret.” In trading, the most典型 symptom of regret aversion is: you don’t want to stop out because you’re afraid that the moment you do, the market will immediately turn around—and you’ll regret it terribly: “I wish I hadn’t stopped out.”
To escape the feeling of “regret,” you choose to keep holding even as losses grow larger. You’d rather accept a “certain, bigger loss” than bear the psychological pain of “possible regret.”
Truthfully, regret aversion is: you do it so that the future you won’t scold the present you, but you end up making the future you lose even more miserably.
🧠 Real trading scenarios (you’ve definitely experienced this)
“I opened a long position, and after entering it fell 3%. According to the plan, I should have stopped out—so I would only be down 3%. But my brain started playing a movie: ‘What if I stop out and it rebounds immediately? Then wouldn’t I be the person who lies down before dawn? I’d regret it to death.’”
So I didn’t stop out. It fell another 5%, and my loss reached 8%. At that point, I was even less willing to stop out—“I’m already down 8%. If I stop out now, what if it really rebounds? Then I’ll get hit on both sides, and I’ll regret it for life.”
In the end it fell 20%, and I got liquidated. Worse still, the very next day after liquidation, it actually rebounded 10%.
Only at that moment did I realize: to avoid that kind of regret—“it rebounds after I stop out”—I ended up enduring a regret ten times bigger: “it rebounds after liquidation.” I’m really so foolish.
📌 Why does it harm people?
Turn small regret into big regret: the “rebound after stopping out” you fear is a low-probability, small-pain regret; but the “liquidation” or “huge loss” that happens after you choose to hold on is a high-probability, big-pain regret. You use bigger risk to escape a smaller mental discomfort.
Make you treat “inaction” as a safety blanket: you think “not moving is better; at least I won’t regret my actions.” But the market won’t stop you from losing just because you don’t move. Inaction itself is a kind of decision—and often the worst one.
Team up with loss aversion to do evil: regret aversion makes you not dare to stop loss, and loss aversion makes you not want to stop loss. One says “afraid of regret,” the other says “afraid of losing money.” Put them together, and you almost can’t stop out on your own.
It makes you lose objective judgment: your decision basis is no longer “what the trend is like,” but “whether I’ll regret it if I take a certain action.” You use emotions as your compass—you naturally get lost.
💊 Antidote (3-step practical exercise—talk after you finish)
Two versions of rehearsing “regret”
When you hesitate about whether to stop the loss, close your eyes and seriously imagine two scenarios:Scenario A: You stop out now, down 5%. Then the market rebounds. You miss the rebound.
Scenario B: You don’t stop out, keep holding the position. The market keeps falling, and you’re down 20%, even getting liquidated.
Ask yourself:Which regret is bigger?The answer is clearly Scenario B. Using this method of “rehearsing regret,” you can compare the “small regret” and the “big regret” side by side, and then you’ll know which one to choose.
Hand decision-making power to rules
The essence of regret aversion is “not wanting to be responsible for a decision you might get wrong.” So don’t let yourself make the decision—replace judgment with rules.
Set a stop-loss order when you open the position, and when the price hits the stop-loss, the system closes the position automatically. It’s not you who decided—it’s the rules. Then you won’t get stuck in the “what if I’m wrong”纠结, because that’s not “your” choice.Write a “regret journal”
After each time you suffer a big loss from holding without stopping out, write in the journal:“What I was afraid of back then was: ______ (for example: it rebounds after I stop out)”
“What actually happened was: ______ (for example: holding until liquidation)”
“If I had stopped out then, my actual loss would only have been: ______”
After recording for a few times in a row, you’ll notice: the kind of “regret” you’re afraid of happens very rarely; but the “regret” caused by not stopping out happens every single time.
🧘 Mindfulness practice (can be done in 30 seconds)
When your mind keeps replaying, “What if it rebounds after I stop out?”—
Close your eyes and take a deep breath. Silently tell yourself:
“A rebound after stopping out is a low-probability regret; getting liquidated after holding is a high-probability tragedy. I choose the smaller one.”
Then open your eyes and execute the stop-loss.
📝 Key quote summary
Small losses are a blessing; big losses are poison. Don’t bear “big regret” just to avoid “small regret.”
🗣️ Introspection questions for this episode (engage in the comments)
“Have you ever held on because you were ‘afraid of a rebound after stopping out,’ and ended up losing even more? In the comment section, tell us how long you held and how much you lost that time?”
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