Why are you always losing money? 10 psychological biases you need to overcome

Source: KoroushAK Avoid the following at all costs:

1. Anchoring Bias

Traders focus on one price (anchor), which may affect their decision-making.

If Trader A added cryptocurrency when the BTC price was $52,000, then $61,000 of BTC would seem expensive.

• If Trader B added cryptocurrency when the BTC price was $71,000, then $61,000 of BTC would seem cheap.

2. Recency Bias

This is the tendency to remember the latest information most deeply and to value this information.

Traders may carry information from recent trades into the next trade, which can lead to overconfidence and losses.

3. Loss Aversion

Traders feel losses more strongly than gains.

The pain of losing $100 may be greater than the joy of making $100.

This bias can cause traders to give up on profits prematurely because they fear those gains will turn into losses.

4. Endowment Effect

When traders hold an asset, they tend to overestimate its value.

This emotional attachment makes it difficult for them to sell at a loss, or even to sell at a fair price, because they rely more on their own expectations rather than actual market conditions to judge the future price of the asset.

5. Herd Mentality

Whether you blindly follow the crowd or deliberately go against the grain, there are risks.

Stick to your own trading plan and avoid acting impulsively due to the behavior of the public.

The behavior of the public should only be considered when conducting objective market sentiment analysis.

6. Availability Heuristic

Traders tend to give too much weight to the most emotionally intense or recent information.

For example, a recent market crash may make traders overly cautious, even if market conditions have changed.

7. Survivorship Bias

Systematically overestimating the probability of success.

What we often see are success stories, while failure stories are often forgotten.

8. Framing Effect

The way information is presented will affect decision-making.

Traders’ emotions and self-confidence affect their risk assessment.

Positive emotions may lead to underestimation of risks, while negative emotions may lead to overestimation of risks.

9. Confirmation Bias

Traders tend to look for data that supports their beliefs.

If you are bullish on an asset, you will look for all the information that supports the bullishness of the asset and ignore the bearish data.

10. Captain Hindsight

In hindsight, everything is obvious.

After an incident occurs, traders often feel that they have foreseen the outcome.

This bias can lead to overconfidence in future predictions and unrealistic expectations about one's own trading abilities.

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