We Are More Sensitive To Small Losses & Gains
The Prospect Theory
- So, if you want to be happy, have lot of small profits, when you have a loss take one big loss.
- [[The Ideal Trading Mindset]] says that an amateur trader mindset involves getting lot of small gains but take one big loss. This is a pleasure seeking mentality. THe professional traders lose a lot small amount but make one big profit once in a while. Hence override this pleasure seeking mentality.
- Small Bet : Many small bets. Limited Upside Potential. Small downside potential.
- Big Bet : One large bet. Unlimited Upside Potential. Big downside potential.
- Small Bet has asymmetry. ( Antifragility )
==We are programmed to avoid discomfort, but we need it to get better.==
- Prospect Theory + Consistency Bias gives insight.