Confirmation Bias
The tendency to seek out information that supports a trade idea you already hold and dismiss evidence that contradicts it.
Confirmation bias makes you a terrible analyst of your own trades. Once you have decided a stock is bullish, you will unconsciously read every ambiguous signal as confirming your view and explain away every bearish signal as temporary or irrelevant.
It shows up in research: you read three bullish articles and stop there. It shows up in chart reading: you zoom into the timeframe where the pattern looks cleanest. It shows up in news consumption: you follow only analysts who agree with your current position.
The fix is to actively seek the bear case before every entry. Write down the three best reasons NOT to take the trade. If you cannot find any, you are not looking hard enough.
Related Terms
Anchoring Bias
Fixating on an arbitrary reference price — like your entry or an old high — and letting it distort your current trading decisions.
IntermediateCognitive Bias
A systematic error in thinking that distorts perception, judgement, and decision-making — markets are full of them.
IntermediateFUD
Negative sentiment — often spread deliberately — that shakes weak hands out of positions before the real move higher.
BeginnerHerd Mentality
Following the crowd into a trade because "everyone else is doing it" rather than because your own analysis supports it.
BeginnerHindsight Bias
The belief, after the fact, that the outcome was obvious all along — distorting post-trade reviews and inflating false confidence.
IntermediateOverconfidence Bias
Systematically overestimating the accuracy of your analysis, the reliability of your edge, or your ability to control trade outcomes.
IntermediateRecency Bias
Overweighting recent events when forecasting future price action, as if the last few candles predict the next hundred.
IntermediateSunk Cost Fallacy
Holding a losing trade because of how much you've already lost in it — as if the market cares what you paid.
BeginnerTrading Plan
A written document that defines your entry criteria, exit rules, position sizing, and daily loss limits before the market opens.
Beginner