We Are More Sensitive to Small Losses & Gains

• Tue, Dec 6, 2022
• One-minute read

We Are More Sensitive To Small Losses & Gains

The Prospect Theory

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• So, if you want to be happy, have lot of small profits, when you have a loss take one big loss.
• [[The Ideal Trading Mindset]] says that an amateur trader mindset involves getting lot of small gains but take one big loss. This is a pleasure seeking mentality. THe professional traders lose a lot small amount but make one big profit once in a while. Hence override this pleasure seeking mentality.
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• Small Bet : Many small bets. Limited Upside Potential. Small downside potential.
• Big Bet : One large bet. Unlimited Upside Potential. Big downside potential.
• Small Bet has asymmetry. ( Antifragility )
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==We are programmed to avoid discomfort, but we need it to get better.==

• Prospect Theory + Consistency Bias gives insight.