Definition
Loss aversion is the tendency to experience losses more strongly than comparable gains, which can distort otherwise consistent financial decisions.
In market context
A trader may hold a losing position to avoid recognizing the loss, close a winner too early, or take excessive risk to return to break-even. These choices can violate the original risk-reward assumptions and turn a manageable loss into a larger one. Predefined exit criteria, position limits, and decision journals can make the bias visible, though they cannot guarantee disciplined action or profitable outcomes.
Source
Use the primary source for fuller regulatory or market context.
