Confirmation bias

Trader's Glossary · Psychology

Definition. The tendency to seek out and notice information that confirms our beliefs and to ignore information that contradicts them.

How it works

Once we have a scenario in mind, the brain selectively registers arguments for it. It's one of the best-documented cognitive biases.

Example

A trader expecting a rally notices every sign of buyer strength but ignores weakening delta and the lack of confirmation in the broad market.

What to watch out for

What helps: consciously asking “What would I need to see to admit I'm wrong?” and writing the answer down before the decision.

See also

Overconfidence, Anchoring, Outcome bias.

More in Hetman Capital Club

You'll find the full explanation with graphics, examples and exercises in the 💪 Fitness and routine space, and its use in the live market in the 🔴 Live Room. Both are available to Club members (in Polish).

Educational content, not investment advice.

Full article in the Atlas of biases: what this bias looks like in trading, an example and the research.