Valuing an immediate reward far above a larger one later, which is why a small profit now beats letting a winner run.
Discounting is steepest close to the present. A gain available right now feels disproportionately better than a bigger gain in three days, and the gap shrinks as both move further away.
This is a direct cause of cut winners. Closing at plus half an R gives an immediate, certain reward; holding to target requires tolerating uncertainty for hours. The immediate reward wins even when the maths does not support it.
Mechanical exits are the standard answer: a defined target, a trailing rule, or a runner left on while the rest is trimmed. The point is to decide the exit at a distance, when the discounting curve is flat.
Original diagrams for the ideas on this page. Illustrative, not real market data.
Risk and reward on one trade. One trade on a price scale: the entry sits 2.00 points above the stop and 6.00 points below the target, so the shaded reward band is three times the risk band. The ratio compares what is lost if the stop is hit with what is gained if the target is reached.
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