What is Confirmation Bias?

What is Confirmation Bias?

Confirmation bias is the tendency to seek information that supports an existing view while ignoring evidence that contradicts it. Traders stuck in confirmation bias often hold losing positions longer than planned.

Signs of Confirmation Bias

• Selective research: Reading only bullish forecasts when holding a long trade.
• Indicator overload: Adding tools until one agrees with your bias.
• Dismissed data: Ignoring macro releases that oppose your trade idea.
• Delayed exits: Waiting for price to recover instead of respecting stops.

Practical Countermeasures

• Binary checklists: Use yes/no criteria that must be satisfied before entry.
• Set review times: Reassess trades at predetermined intervals regardless of bias.
• Journal both sides: Document bullish and bearish arguments for each setup.
• Invite feedback: Share trade ideas with peers who will challenge the thesis.

Deep Dive

Most edges come from applying clear rules consistently. Expand your analysis beyond a single signal: add context from higher timeframes, recent volatility, session behavior, and catalysts. Define invalidation so a trade becomes obviously wrong fast, keeping losses small while letting winners compound.

Trader Checklist

• Higher‑timeframe bias aligns with the setup.
• Clear level or zone for entry with confluence.
• Pre‑defined stop beyond structure; 2–3R target.
• Session/liquidity supports follow‑through.
• No imminent high‑impact news unless planned.

Strategy Ideas

• Combine structure with momentum confirmation (break/close/acceptance).
• Use partials: scale out at first target; trail remainder.
• Journal results by session and pair to refine timing.

Risks and Limitations

• Thin liquidity widens spreads and distorts signals.
• False breaks around obvious levels—wait for acceptance.
• Overfitting indicators; keep the process simple and robust.

Example

Map bias on the daily chart, mark a zone, and wait on 1H for a close back above with rising participation. Enter on the retest; stop beyond the invalidation wick; target prior swing with room for extension. Record the outcome and context to iterate.