Cognitive Bias
Confirmation Bias — Definition, Examples, How to Fix
Seeking out information that supports an existing position while ignoring contradicting signals.
What it is
Once a trader has taken a position, the brain selectively attends to information that confirms the trade was right. Bullish news is amplified, bearish news is dismissed as "noise." Indicators that show weakness are ignored; ones that show strength are screenshotted. The trader believes they're being analytical when they're being defensive.
What it looks like
- After buying a stock, only reading bullish posts about it on social media.
- Dismissing a clear bearish divergence on RSI because "the higher timeframe still looks bullish."
- Adding to a losing position because of a single piece of supportive news.
Why it costs you money
Confirmation bias delays exits. Trades that should be closed on contradicting evidence stay open, gradually growing into hope-and-hold and averaging-down. The cost is the difference between exiting at the contradicting signal and exiting at the eventual stop or panic exit.
How TradeSaath detects this
TradeSaath looks for trades where you held through clear technical-invalidation events (e.g. broke key support while long), and surfaces the time-gap between the invalidation and your exit.
How to fix it
- Pre-define "what would prove me wrong" before every entry — and write it down.
- When holding a position, deliberately read the opposing case.
- Set technical invalidation alerts that fire even if you're not watching.
- Periodically ask: "If I didn't already own this, would I buy it now?"
Related
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