The Undefeated Mind: Loss Aversion

 

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Which brings us to the second reason happiness is difficult to achieve: it requires not only the presence of joy (meaning a positive emotional state), but also the absence of suffering.
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Unfortunately, we often fail to appreciate these things as separate and focus most of our efforts on finding things that bring us joy rather than on preparing ourselves to withstand hardship.
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We may think things that bring us joy—a good job, money, a loving spouse, and so on—simultaneously immunize us against suffering, but if anything they actually make us more vulnerable to suffering by providing us more attachments to lose.
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And avoiding the pain of loss is more important than experiencing the joy of gain.
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At least, that’s how many of us behave when forced to choose between the two, a phenomenon psychologists term loss aversion.
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In the world of day trading, for example, most experts agree the best way to make money is by selling losing trades quickly and letting winning ones ride.
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But in one study, 62 percent of traders on average did just the opposite, selling their winning trades quickly and letting their losing ones ride.
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Why?
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Because their desire to avoid the pain of loss, which they could only do by holding on to losing trades long enough for them to become winners and selling their winning trades before they became losers, was greater than their desire to experience the joy of gain (by riding out winning trades until they’d peaked).
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