Cognitive Biases
Unconscious mental distortions that influence our decisions irrationally.
Beginner-friendly explanation
A cognitive bias is a reasoning mistake your brain makes without realizing it. It can lead you to buy or sell at the wrong time. Example: You see everyone buying a crypto and think “it must be a good idea,” without analysis. That’s a bias.
Intermediate-level insight
Cognitive biases are mental shortcuts (heuristics) that distort perceptions of risk, time, or probabilities. They directly impact trading performance. Example: You believe your strategy is good because it won 3 times in a row… but you ignore 10 previous losses. That’s selection bias.
Advanced perspective
Cognitive biases are categorized by origin: attention, memory, attribution, or sampling biases. Identifying them helps refine decision-making models. In trading, they’re studied in behavioral finance and neuroeconomics. Example: An experienced trader uses a checklist to counter automatic biases (confirmation, anchoring, overconfidence) before each trade.
Trader Psychology & Behavior
cognitive bias, judgment error, heuristic, perception, reasoning, mental traps, behavioral psychology