What is Confirmation Bias?

What is Confirmation Bias?

Confirmation bias is the tendency to seek information that supports an existing view while ignoring evidence that contradicts it. Traders stuck in confirmation bias often hold losing positions longer than planned.

Signs of Confirmation Bias

• Selective research: Reading only bullish forecasts when holding a long trade.
• Indicator overload: Adding tools until one agrees with your bias.
• Dismissed data: Ignoring macro releases that oppose your trade idea.
• Delayed exits: Waiting for price to recover instead of respecting stops.

Practical Countermeasures

• Binary checklists: Use yes/no criteria that must be satisfied before entry.
• Set review times: Reassess trades at predetermined intervals regardless of bias.
• Journal both sides: Document bullish and bearish arguments for each setup.
• Invite feedback: Share trade ideas with peers who will challenge the thesis.