A sunk cost is a past cost that the next decision cannot recover. In trading, it can be a spent evaluation fee, research time or a software subscription already used. Those costs may explain how you arrived here, but they do not establish that spending or risking more is worthwhile.

An open position also has current value, exposure and possible exit costs. Treating it as if it were only a past loss misses the decision that remains.

Separate three different decisions

A completed loss: The account has already changed. A new position should be assessed on its own evidence and risk, not on the amount required to return to the old balance.

An open losing position: Compare the current holding with the applicable exit policy, financial limits and available alternatives. Unrealised P&L affects equity before you close; closing changes exposure and realises the result, subject to actual fills and costs.

Another purchase: A reset, course or subscription is a new cash commitment. Previous spending does not make the next payment more likely to succeed.

Why “would I enter now?” is only a prompt

Asking whether you would open the same trade at the current price can challenge attachment to the original entry. It is not a complete exit rule. A strategy may have different conditions for entry and for continuing to hold an existing position.

Transaction costs, existing hedges, restrictions and tax circumstances can also make holding and opening different decisions. Review those factors where relevant rather than automatically closing anything you would not initiate now.

Do not hide account limits or current exposure merely to avoid seeing an uncomfortable P&L number.

Examine changes to the original risk

Suppose a hypothetical long entry is $46 with a planned stop at $45. Moving the stop to $44 doubles the planned price distance from $1 to $2 per share, before execution differences and costs. Without the entry price and quantity, a statement that moving a stop “doubled risk” would be incomplete.

A wider stop or an added position changes exposure. The fact that price is cheaper or that you have waited longer is not sufficient evidence for that change. Check whether it belongs to a defined, evaluated policy and fits current constraints.

A stop order can express an exit instruction, but it does not make losses perfectly predictable. Gaps and execution conditions can produce a different outcome.

Review recurring spending separately

For a paid prop evaluation, list the fee already spent, the cost of a new attempt and what has materially changed since the previous one. Check the current programme and refund terms rather than assuming another attempt recovers the original purchase.

For a course or tool, identify the remaining benefit you expect and whether a lower-cost alternative serves it. An unused subscription may be worth cancelling even after substantial time spent learning it.

Frequently asked questions

Is averaging down always a sunk-cost error? No. Planned scaling and an impulsive attempt to improve the displayed entry price are different. A plan can still be unsuitable, so assess total exposure and evidence rather than relying on the label.

What if price recovers after I exit? That later movement does not prove the earlier decision was wrong. It also does not make every rule-based exit correct. Review whether the rule remains supported across more than one selected outcome.

Should losses be treated as ordinary business expenses? A learning budget can constrain spending, but calling losses an expense does not make them necessary, deductible or acceptable. Financial and tax treatment depends on the actual circumstances.

For the next-step review after a loss, see our recovery guide.

Risk Disclaimer: Trading involves substantial risk of loss. Past performance is not indicative of future results. See our full risk disclaimer.