Cognitive biases in trading
In this lesson you'll learn
- The biases that affect trading decisions most
- How each shows up on the chart
- Practical counter-measures
Shortcuts that misfire
Our brains use mental shortcuts that work in daily life and misfire in markets. Knowing them doesn't remove them, but it helps you build defences.
| Bias | In trading | Counter-measure |
|---|---|---|
| Confirmation bias | Only noticing evidence that supports your trade | Write the case against the trade before entering |
| Recency bias | Overweighting the last few trades | Judge on 50+ trades, not the last 5 |
| Loss aversion | Holding losers, cutting winners | Stop and target fixed in advance |
| Sunk cost | "I've lost so much, I can't close now" | Ask: would I open this trade now? |
| Overconfidence | Bigger size after a streak | Size changes only on a schedule |
| Anchoring | Fixating on an old price ("it was 4000 last week") | Use current structure and levels |
| Herd behaviour | Trading because everyone in the group is | Trade only your plan's setups |
The best defence: process
Written rules, checklists and journals work because they move decisions out of the moment, where biases are strongest.
Common mistakes
- Reading only analysis that agrees with your position.
- Keeping a losing trade because of what it already cost.
- Assuming you're immune to biases.
Check yourself
1. "I've lost so much, I can't close now" is…
2. A counter to confirmation bias is…
3. Judging a strategy on the last 5 trades is…
Key takeaways
- Biases are normal mental shortcuts that misfire in markets.
- Each has a practical counter-measure.
- Process moves decisions away from the moment.
Education, not advice. Goldman Academy teaches how markets and tools work. Nothing here is a recommendation to buy or sell, and no lesson promises profits. Trading leveraged products carries a high risk of losing money; only trade money you can afford to lose. · Written by Goldman Academy, reviewed by Christian