Mental Accounting postulates that individuals focus on independent economic buckets instead of the overall economic outcome[1]. This is built upon the foundations of the framing effect in prospect theory, where an opinion is formed based on how the information is provided, a positive opinion correlates to positive information and vice versa.
This can be seen where individuals are more likely to spend their bonus as it is framed as a reward for hard work as opposed to their normal wage, which is framed as money for expenses.
Traders often take more risk when they are winning as opposed to when they are losing, the house money effect[2]. This is an inherent view that when they have more, they can bet more, however circumstances often change after a winning run and if bet sizes are larger than normal then losses would be larger than normal, a better strategy would be to bet consistently, providing that one has an edge.
[1] Thaler, R.H. (1999) ‘Mental Accounting Matters’, Journal of Behavioral Decision Making, 12(3), pp. 183–206. doi:10.1002/(SICI)1099-0771(199909)12:3<183::AID-BDM318>3.0.CO;2-F.
[2] Where individuals take greater risks with money they perceive as “gains” or “house money” than they would with their original investment, savings, or baseline wealth.