The theory states we have an irrational tendency to be less willing to gamble with profits than with losses
Option 1: 75% you make $1000, 25% you make $0
Option 2: Or 100 percent chance of making $750
Option 1: 75% you lose $1000, 25% you lose $0
Option 2: Or 100 percent chance of losing $750
Most people choose option 2 in situation 1 and option 1 in situation 2, although the expected values in both options (in both situations) are equal.
Lose x% and gain x% result - you lose
Gain x% and lose x% result - you lose
[P(1-x)] (1+x) = P(1-x^2) < P [P(1+x)] (1-x) = P(1-x^2) < P
It does not matter whether you win x% first and lose x% later or vice-versa, in both cases you end up losing money. Infact do this repeatedly and you will go broke.