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There is a wide range of biases that affect us in our daily life that can cause us to see patterns that are not necessarily there. Below is a list of six cognitive biases that traders should be aware of and know how to handle these pre-conceived thoughts.This is a type of bias where people look for information that confirms their original beliefs, and ‘bury their head in the sand’ when they are presented with information that does not agree with their view.
In short, this is taking credit for when things go well but blaming other factors when things go wrong. This leads traders to look at themselves in an overly favorable fashion, as they believe all profits are due to their skills but all losses are due to the fault of others. Traders must be confident in their ability but they must also recognize when they have made a mistake, and work out why it happened and how to make sure it doesn’t happen again.
This bias is commonly described as the tendency to use information that comes readily to hand when making a decision. This can lead to bad decision-making as traders may base their view on easily available information instead of conducting thorough due diligence and fact-checking before entering a trade. In essence, individuals exhibiting an availability bias enter into trades on information that is often incomplete or even inaccurate.
We recommend that you seek independent advice and ensure you fully understand the risks involved before trading.a registered Introducing Broker with the Commodity Futures Trading Commission and is no longer a Member of the National Futures Association in the U.S. Any and all information provided by FXP is not intended for use by U.S. residents or individuals domiciled in the U.S.
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