Anchoring Bias — Definition, Examples, How to Fix

What it is

Anchoring bias in trading shows up most clearly around the entry price. Once you've bought at ₹100, the brain fixates on that number: ₹95 feels like a loss to recover from, ₹105 feels like a profit to lock in, ₹110 feels like greed to resist. None of these references are relevant to whether the trade is currently working — but the entry-price anchor drives the decisions anyway.

What it looks like

• Refusing to take a profit at ₹103 because "I bought at ₹100 and it should run further."
• Holding a losing position to ₹98 because "I just want to get back to break-even."
• Setting take-profit at exactly the round number above the entry, regardless of structure.

Why it costs you money

Anchoring causes both early profit-taking on winners (because "any profit is good") and late stop-outs on losers (because "I just need it to come back"). Over a year, this asymmetry typically cuts the average win to ~70% of the average loss.

How TradeSaath detects this

TradeSaath compares your typical exit price levels (relative to entry) against the trade's actual price action. Repeated patterns of exiting near round-number profits and just-past-break-even on losers surface as anchoring.

How to fix it

1. Set targets and stops based on chart structure, not on entry price.
2. After entry, hide the entry price from your visible position info.
3. Define exit levels in absolute price terms, not "+5%" or "-2%" of entry.
4. Practice closing at structure even when it means a small loss to avoid the anchor.

Related

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