The Trading Coach Podcast 1256 - Game Theory, Sunk Cost Fallacy & the Psychology Destroying Your Edge
Dec 22, 2025
Discover the intriguing intersection of game theory and trading psychology. Learn why traders often fall prey to the sunk cost fallacy, adding to losing positions despite knowing better. Explore how anticipating other traders can refine your decisions and why viewing trading as a competition can be detrimental. With insights drawn from poker, Akil emphasizes the importance of letting winners run and cutting losses early. Gain practical strategies to avoid emotional traps and enhance your trading discipline.
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Trading Isn't Purely Zero-Sum
- Trading is not strictly a zero-sum game; buyers and sellers can both profit from the same move.
- Thinking like the other trader reveals cooperative flows and reduces perceived competition.
Ignored My Trade Because Of Forum Noise
- Akil shared his early forum experience where he abandoned his own short because a popular poster disagreed.
- His original short won big and he missed it after letting outside opinion override his plan.
Let Winners Run, Cut Losses At Your Stop
- Let winners run within your projected target and cut losses at your pre-defined stop.
- Use stops placed where your analysis is proven wrong, not arbitrarily closer to save capital.