Stop-loss Rule
Updated 2026-08-13
INTRODUCTION
English translation pending.
CORE DEFINITION
A stop-loss rule fixes a maximum acceptable loss before a commitment is made and requires exit when that level is reached, with no renegotiation at the moment of loss. The core proposition is that the decision to exit must be made in advance, because at the moment of loss loss aversion and sunk-cost reasoning both push toward continuation. The key qualification is that the rule only works if it is executed mechanically: moving the threshold once it is approached converts the discipline into self-deception.
SCAFFOLDING EFFECT
Reduce cognitive load
- Threshold preset: write the exit level before entering, while the judgment is still unclouded. - Mechanical exit: act on the threshold without re-opening the decision again. - Attribution review: after exiting, record why the position was taken and what the loss taught you.
Anchor fast decisions
Losses hurt more than equivalent gains please, so continuing after a loss feels like avoiding pain rather than taking a risk. A pre-committed rule removes the decision from that moment, when the emotional weighting is strongest. Because the maximum loss is bounded before the position exists, the portfolio of commitments can be sized without depending on in-the-moment discipline.
MINIMUM ACTION
In progress 0/1Practice this model in one real situation:
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Source support: Explicit
- en.wikipedia.orghttps://en.wikipedia.org/wiki/Stop-lossverified
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