Confirmation Bias in Trading: Seeing What You Want to See
Confirmation bias makes you seek evidence that supports your position and ignore evidence against it. Learn to fight it. Test your bear case honestly before.
What Is Confirmation Bias?
Confirmation bias is the tendency to seek, interpret, and remember information that confirms your existing beliefs while ignoring contradictory evidence. In trading: you're long, so you read bullish news and ignore bearish signals. You see support levels but not resistance.
How It Manifests in Trading
- Only looking at indicators that support your direction
- Ignoring a bearish divergence because 'the trend is still up'
- Reading only bullish analysis and dismissing bearish views
- Remembering your wins and minimising your losses
- Moving stops wider because 'it'll come back'
Fighting Confirmation Bias
(1) Before entering, write down 3 reasons to take the opposite trade. (2) Set a 'devil's advocate' rule: for every signal, check the 4H and Daily in the opposite direction. (3) Use mechanical rules: if your entry criteria are met, enter; if not, don't — regardless of how you feel. (4) Review losing trades weekly — look for evidence you ignored.
Disclaimer: CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 70-80% of retail investor accounts lose money when trading CFDs. Backtesting does not guarantee future results. Always consider whether you can afford the potential loss of your capital.