How Can Cognitive Biases Affect Your Trading Performance?

 According to Wikipedia, cognitive biases are “systematic patterns of divergence from the norm or rationality in judgment… (where) an individual’s construction of reality, not the objective information, may control their behavior in the world.” Or, to put it another way, the brain sometimes seeks to compress information to make decision-making simpler and faster. In Trading, the trader may need help objectively assessing information because of this simplification or dependence on a condensed version of reality.

We all have a variety of biases that influence us daily and may lead us to see patterns that aren’t there. The six cognitive biases traders should be aware of and understand how to control are listed below.

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EDGE-FOREX

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