What is Anchoring Bias in Trading?

What is Anchoring Bias?

Anchoring is a cognitive bias where traders cling to the first piece of information they see—such as their entry price or an analyst forecast—and underreact to new data. Anchored traders hold losers too long or ignore evolving market conditions.

Anchoring in Practice

• Entry fixation: Refusing to exit a losing trade because “it will come back.”
• Round-number anchors: Assigning undue importance to prices like 1.2000.
• Outdated forecasts: Sticking with old economic projections despite new releases.
• Historical highs: Assuming prior resistance must hold without reassessing context.

Reducing Anchoring

• Automate stops: Let predefined exit rules override emotional attachment.
• Use conditional language: “If price closes below support, I will exit” keeps decisions objective.
• Embrace new data: Update your bias after each major release or central-bank speech.
• Review mistakes: Tag journal entries where anchoring affected performance to build awareness.