Who it's for — Anyone who splits «recovery capital», «untouchable profit», or «casino money» with different rules — while one euro remains one euro in the account.
Mental accounting describes splitting capital into mentally labelled buckets: «recovery», «bonus», «core» — each with different risk rules. Linked to prospect theory and loss aversion.
In plain terms — One euro is one euro, but you do not treat it that way. You may hold losers in «recovery» and over-risk wins in «bonus».
Trading effects
| Typical bucket | Distorted behaviour |
|---|---|
| «Recovery» | Hold losers, revenge trading |
| «Bonus profit» | Oversize speculative trades |
| «Sacred capital» | Paralysis or under-invest |
| «Casino» | Ignore risk management |
Unified management with defined operating capital and fixed size reduces fragmentation.
Common mistake — «This trade uses only profits» — real risk on total account stays the same.
Example — +€500 in a week: label it «bonus» and double size on marginal setups. One loss wipes the week — same account, inconsistent rules.
Summary card
- What it is: mental capital compartments.
- Antidote: one risk plan for the whole account.
- Hub: Trading psychology.