What Is Chasing Losses?
You lose £200 on a trade. Instead of accepting it and moving on, you immediately open another position—bigger this time—to make it back. Then that one loses too, so you double down again.
This is chasing losses: increasing your risk after a loss in an attempt to recover quickly. It’s one of the most destructive habits in trading because it compounds mistakes into disasters.
The Psychology
Loss aversion is real—behavioral economics shows humans feel the pain of losses roughly twice as intensely as the pleasure of gains. When you lose money, your brain screams “fix this now.” That’s not rational thinking; it’s emotional panic.
Ego protection plays a role too. Admitting a loss feels like failure. Chasing becomes a way to avoid that painful feeling—until the losses become so large that denial is no longer possible.
The Dangers
Larger position sizes are the most obvious risk. Doubling down after losses quickly depletes your account during losing streaks, which happen to every trader—even profitable ones.
But the emotional spiral is worse. Each loss compounds frustration, leading to even worse decisions. This downward cycle can wipe out months of gains in a single bad session.
How to Stop
Accept losses immediately. The moment a trade goes against you, accept it as a cost of doing business. Every trader loses—what matters is how quickly you move on.
Set daily loss limits. Pick a maximum daily loss (say 2–3% of your account). Once hit, stop trading for the day. Walk away. This prevents emotional spiral-trading when things go wrong.
Take a break after losses. After any losing trade, step away from your screen for at least 30 minutes. Walk outside, exercise, or do something unrelated to trading. Your brain needs distance from the loss before making rational decisions again.
The Bottom Line
The market will always be there tomorrow. Protect your capital today by accepting losses quickly and never letting emotion override your plan. Chasing losses is how accounts die—not because the strategy was wrong, but because the trader refused to cut their losses.
