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Trading glossary · psychology

cognitive bias

A thinking mistake: a shortcut your brain takes that makes you judge things wrongly without noticing.

The fuller meaning

A systematic error in judgement caused by mental shortcuts. The lessons cover confirmation bias, recency bias and anchoring, plus loss aversion and overconfidence; traders counter them with written rules, checklists and journals, and by asking for the strongest case against a trade.

cognitive bias, also called bias.

Related words

anchoring · boredom trading · chasing · confirmation bias · consistency · cool-down rule · discipline · disposition effect · emotion · entry rule