Escalation of Commitment
Escalation of commitment in Forex trading occurs when traders continue to invest in a losing position, hoping it will turn around, instead of cutting their losses. This behavior is driven by emotions like loss aversion, the desire to recover previous …
Escalation of commitment in Forex trading occurs when traders continue to invest in a losing position, hoping it will turn around, instead of cutting their losses. This behavior is driven by emotions like loss aversion, the desire to recover previous losses, and the reluctance to admit a mistake.
Common signs include adding more to a losing trade or ignoring preset stop-loss levels. It often leads to increased losses, emotional stress, and potential capital depletion. To avoid this, traders should adhere to strict exit strategies, manage risk, and evaluate trades objectively.
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