The study involved a group of participants who were asked to take two consecutive gambles using real money. In the first gamble, the group either won or lost money. But what happened when they were asked to take the second gamble? Well, if they had won on the first gamble, they were willing to risk money on the second. Interestingly, however, those who had lost money on the first bet refused to make a second bet. It goes to show that people can be very undisciplined after a big win, to the point of taking unnecessary risks. Its called the House Money Effect - when people gain a windfall, they dont mind risking it again - or even losing it. The money is not seen as theirs, but rather free money.

In contrast, those that lost money on the first gamble were not willing to make a bet a second time. Every heard of once bitten, twice shy? Once youve been bitten, youre afraid to try again. Its called the Snake Bite Effect - for obvious reasons!

Ironically, when someone has a huge loss, they quickly forget the snakebite, and would make their money back. This phenomenon, called the Break Even Effect means people will do just about anything to win back what theyve lost. However, riskier bets often mean even bigger losses in the end.

The key to managing financial risk is to use a structured approach to managing uncertainty through risk assessment, developing strategies to manage it, and mitigating possible risk using managerial resources. Risk and trading are two sides of the same coin. You cant avoid risk if you want the potential rewards of trading.

If you are going to experience real, long lasting success in the trading industry, then you are going to have to accept that you are going to make mistakes. Sometimes, you are going to make huge mistakes. Sometimes they will just be little mistakes. You cant get into anything new and expect to go through the process without making mistakes. Mistakes are nothing more than learning opportunities that will show you how to take a more effective next right step. There is no reason why you cant overcome any mistakes that you might make along the way. When you find that you have erred on some level, refocus on the larger picture, drawing out the best in yourself through self forgiveness, education, and the grace to allow yourself to move past your errors.