The Sunk Cost Trap In Open Positions

The sunk cost trap is the tendency to keep investing time, money, or attention into something because of what has already been put into it, rather than because of its actual future prospects. In trading, this often shows up in how open positions are managed.

How It Plays Out

• Adding to a losing position to "average down" mainly to justify the original entry, not because new analysis supports it
• Refusing to close a losing trade because doing so would make an earlier mistake feel final
• Holding a trade past its original invalidation point because of how much time or attention has already gone into it

In each case, the decision is being driven by the past rather than by current market conditions — money or effort already spent has no bearing on what happens next.