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Trading Psychology

What Is the Sunk Cost Fallacy in Trading

The sunk cost fallacy is a cost that is already paid pulling on a decision it is no longer part of — keeping a losing trade for the sake of the money it has already lost, when that money is the same whether the trade is kept or closed. This paper shows you the same 50 dollars in both choices on the euro against the dollar on 28 July 2025; the idea as a paid seat at a bad film; the two lines on the fifteen-minute chart; the road already walked and the hour still open; and the Profit column on your platform, which reads the same number in both choices.

Difficulty
Beginner
Reading time
5 min
Pages
8
Reviewed by
Saman Rahbar

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The same 50 in both choices

The sunk cost fallacy is a cost that is already paid pulling on a decision it is no longer part of. The euro against the dollar was bought at 1.17166, its 10:00 close on 28 July 2025, at 0.10 lot, where 1 pip is 1 dollar. At 13:00 the price is 1.16666, 50 pips and 50 dollars down. Closing costs 50. Keeping it costs 50 plus whatever the next hour brings. The 50 is in both rows; it is spent either way, and nothing the trader does at 13:00 changes it. The fallacy is choosing the second row because of the 50, as if keeping the trade could keep the money. The only thing still open at 13:00 is the next hour.

A paid seat at a bad film

Picture a cinema. The ticket is paid for, the film is bad, and there is a door at the side. The ticket costs the same whether you sit through the film or leave; staying does not get the money back, it only spends the hour on top. Most people stay anyway, because leaving feels like wasting the ticket. A losing trade is the paid seat. The 50 dollars is the ticket, the next hour is the film still to run, and the door is the close button. The fallacy is keeping the seat for the sake of a ticket that is spent either way, and it feels like thrift while it is happening.

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