Chapter 35 · Trading Psychology
Trading psychology
The predictable ways your own judgement works against you, and the only reliable defence.
63 of 66 · 9 min
Every method assumes a decision-maker who weighs evidence consistently. Nobody is that. These failures are systematic, which means they can be anticipated.
| Bias | What it does |
|---|---|
| Loss aversion | Losses hurt about twice as much as equivalent gains please — so losers are held and winners sold early |
| Confirmation bias | Once you own it, contrary information becomes easier to dismiss |
| Recency | Recent events feel far more likely to repeat than they are |
| Anchoring | Your purchase price feels significant. The market has never heard of it |
| Herding | A crowd feels like evidence; in a small market it often means one message spread |
| Overconfidence | Rises after a run of wins — exactly when position sizes should not |
| Sunk cost | Money already lost pulls you into defending the decision rather than judging it |
The habit worth more than any indicator
Write down why you bought, in one or two sentences, before you buy. Months later, when the price has moved, that note is the only honest record of what you originally thought — because memory quietly rewrites itself to match the current price.
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