Want To Be A Successful Trader? Know Your Cognitive Biases

You are your own worst enemy when trading or investing in the markets.

Humans, in general, aren’t naturally wired to be good at assessing, and taking risks. A lot of this has to do with cognitive biases, which affect the ways in which we think and make decisions, often in very sneaky and insidious ways.

If you want to be a successful trader or investor, you will need to know what these biases are, how they affect you, and what steps you can take to mitigate them.

Why Successful Traders Cannot Afford To Be Too Optimistic

Beware the optimism bias when trading and investing

Do you believe that negative outcomes are somehow less likely to happen to you? Because most people do.

They believe that they are likely to live longer than the average person, less likely to get divorced, less likely to get into a traffic accident, etc.

But, not everyone can consistently be above average, and traders who like to think that they are quickly find out otherwise – often in very painful ways.

Read Article

Are You A Victim Of Overly Simple Narratives?

Cognitive biases can negatively affect our decision making, especially when it comes to trading and investing

Humans have an innate need for explanations. In our minds, every effect must have a cause, and we naturally seek out reasons for events that occur.

This is part of a broader narrative bias, and while useful in simple scenarios, it can be dangerous when applied to complex systems like financial markets.

Read Article

Do You Think Like A Zebra In Markets?

The problems posed by the Narrative Bias are exacerbated by our human tendency to go emotionally “all in” on something – we either fully like it, or fully dislike it.

This is known as the halo effect, and leads to black and white thinking that can be counterproductive to traders.

Read Article

15 Cognitive Biases Traders Must Know To Be Successful

Cognitive biases can negatively affect our decision making, especially when it comes to trading and investing

Cognitive biases are insidious. As a matter of fact, they are probably affecting your trading profitability right now.

Here is a quick summary of the ones you must be aware of.

Read Article

the pensive nugget blue background logo

Get a different perspective on all things trading & investing every week!