Sunk-Cost Fallacy
Also known as: sunk cost bias, throwing good money after bad, averaging down on losers
The sunk-cost fallacy is the tendency to weight money already spent as a reason to keep spending, surfacing in trading as adding to a losing position because the trader is already in rather than because the new entry has independent merit.
Sunk costs are economically irrelevant by the time the trader is standing in front of the next decision; what matters is the expected value of what happens next. Knowing this and trusting it are different. The brain treats already-committed money as a debt it has to recover, and the simplest way to feel like it is recovering is to push harder in the same direction.
In a trading account this looks like adding size to a losing position not because the thesis is stronger but because the average entry price will be more flattering, doubling down on a system after it has underperformed for a quarter just because the trader has already invested time learning it, or holding a position past its original stop because closing here makes the loss official. Every one of those decisions trades expected value for emotional accounting.
The remedy is a simple journal habit: write down the entry trigger and the stop before the trade, and refuse any change to either that is not itself an independently valid entry.
Position increases on losing trades that do not match the trader's documented add-on rules; stops moved against direction after entry.
Surfaces inside Plan Adherence and Size Discipline on the diagnosis.
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