15 Cognitive Biases Traders Must Know To Be Successful
Cognitive biases are insidious, and are probably affecting your trading profitability right now.
Here is a quick summary of the ones you must be aware of.
Do You Think Like A Zebra In Markets?
Humans have a tendency to fully like, or fully dislike something.
This is the halo effect, and leads to black & white thinking that is inimical to traders.
Are You A Victim Of Overly Simple Narratives?
Humans have an innate need for explanations; every effect must have a cause.
This is part of a narrative bias, which can be dangerous when applied to markets.
Why Successful Traders Cannot Afford To Be Too Optimistic
Do you believe that negative outcomes are less likely to happen to you?
Most people do.
Traders who think so quickly find out otherwise, in painful ways.
Why You Should NOT Only Focus On Success Stories 2
Besides focusing on emulating successful individuals to the exclusion of all else, how does the survivorship bias apply to trading and investing?
Why You Should NOT Only Focus On Success Stories 1
Our tendency to focus only on success stories is what is known as the survivorship bias. But, can they teach us as much as we think they can?
What Connects 9/11, Brains, & Trading? Why’s It Important? 2
Just as our availability bias can cause us to be over optimistic, it can also cause us to be over pessimistic. Here’s how to mitigate its effects.
What Connects 9/11, Brains, & Trading? Why’s It Important? 1
Do you remember what were you doing on 9/11? Or 2008 when markets crashed? How is this important for trading and investing?
Do You Like Confirming You’re “Right” When Trading? STOP!
Confirmation bias may be the most dangerous cognitive bias for traders. This is due to the fact that it influences what positions we take in the market.
Have You Been Fooled By The Law Of Small Numbers?
The law of small numbers refers to our human tendency to draw firm conclusions from small samples. Which more often than not leads to our detriment.
