Eight common cognitive biases in trading: How many do you account for?
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Loss aversion: A strong preference to avoid losses. In other words, not losing money is far more important than making money. [Hinder yourself from taking action and give yourself a comfortable and safe space]
Sunk cost effect: More emphasis is placed on money already spent rather than money that may be spent in the future. [Ignore the results of individual transactions and think from the perspective of overall probability]
Disposition effect: taking profits early but letting losses linger. [Don’t hold orders, do a good job of tracking and taking profits (let profits run)]
Outcome preference: Only judging the quality of a decision based on its results, without considering the quality of the decision itself. [Short-term results are not objective and do not represent the overall situation]
Recency bias: Paying more attention to recent data or experience and ignoring earlier data or experience. [Tendency to pay more attention to recent data and experience]
Anchoring effect: Overreliance on readily available information. [The bottom line is to put yourself]
Bandwagon effect: Blindly believing something because so many other people believe it. [Cannot follow the herd effect]
The Law of Small Numbers: Drawing unfounded conclusions from too little information. [Choose a short position without any basis for conclusion]