Trading Psychology

Confirmation Bias: Seeing What You Want to See

Confirmation bias causes traders to seek evidence for their existing view rather than what the chart actually shows.

Key rules

1. Pre-define your invalidation scenario before entering any trade
2. Actively seek evidence AGAINST your trade thesis
3. If you cannot argue the bear case, you have confirmation bias
4. Use a checklist rather than narrative reasoning for entries
5. Price is objective; narrative is subjective — trust price

Once you have a directional bias, your brain selectively focuses on confirming evidence and dismisses contradicting signals. This leads to forcing setups and holding losing positions too long.

The remedy is to explicitly articulate what would invalidate your thesis before entering. Write it in your journal. If that level is reached, exit — your plan said to.