Loss aversion means...

Losses hurt more than equal gains feel good

Loss aversion often makes traders...

Hold losers and close winners early

Set stop and target before entering

Refuse it, though it pays on average

A friend offers a coin flip: heads, you win US$150. Tails, you lose US$100. Most people say no, even though the deal is in their favour.
That's loss aversion: a loss hurts roughly twice as much as a win of the same size feels good.
Psychologists Daniel Kahneman and Amos Tversky described this in 1979. In tests, most people only accept a 50/50 bet if the possible win is about twice the possible loss.
In trading, it turns good habits upside down. You hold losing trades, hoping they come back, and close winners early to lock in the good feeling.
Common mistake
Myth: "I win most of my trades, so I'm doing well." Reality: win 4 trades at +US$20 and lose 1 at -US$100, and you're down US$20 with an 80% win rate.
Key takeaway
Set your stop and target before you enter, while you're calm. Then let the plan decide, not the feeling.

Loss aversion means... Losses hurt more than equal gains feel goodStudies suggest a loss feels roughly twice as strong as a gain of the same size.
Loss aversion often makes traders... Hold losers and close winners earlyClosing a loser means accepting the pain, so people wait. Closing a winner locks in the good feeling, so they rush.
A good defence against loss aversion is to... Set stop and target before enteringBefore you enter, you're calm. Once money is at risk, loss aversion pushes you to hold and hope.
A 50/50 bet: win US$150 or lose US$100. Most people... Refuse it, though it pays on averageOn average it pays US$25 a flip, but the US$100 loss feels bigger than the US$150 win. That's loss aversion.