Treating a declining asset as a bargain simply because its price is lower than a recent peak is a classic symptom of anchoring bias.

Emotional trading often drives participants to add capital to losing positions hoping for a mean reversion. In contrast, a strict risk framework relies on pre-defined invalidation levels tied to market structure rather than psychological comfort. If a setup breaks its technical threshold, the position is closed regardless of how attractive the lower entry price feels.

Separating entry evaluations from recovery hopes stops a minor drawdown from escalating into systemic portfolio damage.

#RiskManagement #TradingPsychology