Atlas of Cognitive Biases #60 · Data and testing. The target painted after the shot
What it looks like in trading
discovering a rule after looking through charts that “confirm” it
picking hours, days and conditions so the result looks good
“this indicator predicted the last three tops”
An example from a session
A trader goes through a month of charts and notices that “declines often start at 12:40 PM”. It's a rule painted around random hits. Testing it on the next month usually disproves it.
What the research says
The name comes from the anecdote about a marksman who first shoots at a barn wall and then paints a target around the biggest cluster of holes. In epidemiology the error is described in relation to disease “clusters” that turn out to be random on closer analysis.
Data first, hypothesis second: we look for clusters in the data and only then draw the “target” around them and declare a hit.
How does the Texas sharpshooter fallacy show up in trading?
Typical signs: discovering a rule after looking through charts that “confirm” it; picking hours, days and conditions so the result looks good; “this indicator predicted the last three tops”.
Educational content, not psychological advice or an investment recommendation.