Trading psychology is actually quite interesting; often, our losses are not due to incorrect strategies but are caused by our own psychological effects.

The most common one is the disposition effect. Simply put, we tend to sell winning positions early to lock in profits, but stubbornly hold onto losing positions. The reasons behind this are quite deep: one is loss aversion—people fear losses much more than they desire gains—so they prefer to hold onto their positions rather than admit defeat. Another is cognitive dissonance—when reality doesn't match expectations, we tell ourselves stories to comfort ourselves, convincing ourselves that as long as we wait, the losing stocks will rebound.

The consequences of the disposition effect are actually quite serious. Holding onto losing positions long-term and selling winning positions early will definitely eat away at your overall returns. Moreover, this behavior causes capital to concentrate in losing assets, reducing diversification in your portfolio, which actually increases risk. Not to mention the anxiety of watching losing positions every day, which really affects your mindset.

How to avoid this? First, you need a clear trading plan—write down your entry and exit conditions, risk management strategies—and then stick to this plan. Don't let market fluctuations or emotions change it. Regularly review your portfolio to ensure your holdings still align with your goals. Also, don't trust your predictions too much; do your homework and, if necessary, practice with simulated trading.

Another effect worth paying attention to is the endowment effect. This phenomenon states that we tend to overvalue what we already own. After buying a stock, we inexplicably feel it is more valuable than its actual worth. Even if the market tells us to sell, we still find it hard to let go.

The endowment effect also stems from loss aversion. We fear losing what we already have, so we tend to maintain the status quo. We often ignore opportunity costs, only seeing what we own, and overlook other better investment opportunities.

In trading, the endowment effect can make your decisions very subjective. You might develop emotional attachment to certain assets, overestimating their value, and ultimately make irrational buying or selling decisions. Some people stubbornly hold onto existing positions or refuse to buy promising new assets.

To counteract the endowment effect, the key is to focus on the actual market value of assets, not how much you wish they were worth. Clearly define your investment goals, then objectively evaluate whether each holding still meets those goals. Building a diversified portfolio is also very important, so you don't overly rely on a single asset, making it less likely to be led by the endowment effect.

In short, for successful trading, psychological resilience is more important than technical analysis. Recognize these effects' existence and deliberately work against them to make more objective and rational decisions.