How does decision fatigue impact traders? Anyone who has tried discretionary trading has been there - staring at a screen full of market charts, dozens of indicators clashing with each other, and you just can’t decide: Do I buy? Do I sell? Or do I just walk away and binge on Netflix? Trading isn't hard just because the market is challenging; sometimes, the real enemy is within—decision fatigue....
Sunk Cost Fallacy in Trading: How It Sabotages Stock Traders' Success and How to Overcome ItIn the world of trading, decisions are meant to be data-driven and objective. Yet, even the most analytical traders can fall into the trap of emotional bias. One of the most common and damaging biases is the sunk cost fallacy—a classic example often explored in trading psychology. Let's explore what it...
Introduction to Confirmation BiasHave you ever made a decision and then found yourself looking for information that supports it, while ignoring anything that contradicts it? That's confirmation bias in action - a mental shortcut where we favor evidence that confirms what we already believe. For example, if you decide that a particular stock is a winner, you might only pay attention to news or...
Introduction: What is the Dunning-Kruger Effect?The Dunning-Kruger effect is a cognitive bias where people with low ability, knowledge, or skill in a particular area overestimate their competence. In everyday life, it might show up when someone who's only just started learning about a topic speaks with the same confidence as an expert. You've probably experienced this at a party where a novice...
Introduction to Candlestick PatternsCandlestick patterns are powerful tools in technical analysis that help traders understand market sentiment and make informed trading decisions. By examining the shape and formation of candlesticks, traders can spot potential reversals, continuations, or periods of indecision in the market. In this post, we’ll explore the most common and useful candlestick...
When it comes to achieving mastery in anything, be it trading, sports, or even baking the perfect loaf of sourdough, there's one thing that separates the masters from the amateurs: a willingness to revisit the basics over and over again. I know, it’s not glamorous. And it certainly doesn’t make for the kind of dramatic headline you might see on a flashy trading blog: “How I Repeated the Same...
Explanation of Bearish Engulfing Candlestick PatternThe Bearish Engulfing candlestick pattern is a two-candle reversal pattern that typically signals a bearish trend following an upward movement. It forms when a smaller bullish (upward) candle is immediately followed by a larger bearish (downward) candle, which "engulfs" the previous candle’s body. This pattern suggests that selling pressure has...
Explanation of the Bullish Engulfing Candlestick PatternA Bullish Engulfing pattern is a two-candlestick formation that signals a potential reversal from a downtrend to an uptrend. It occurs when a small bearish candle is followed by a larger bullish candle, which "engulfs" the body of the previous candle. This pattern suggests that buyers have taken control, indicating a possible shift in...
Explanation of Inverted Hammer Candlestick PatternThe Inverted Hammer candlestick pattern is a bullish reversal signal that typically forms at the bottom of a downtrend. It features a small real body at the bottom, with a long upper shadow that is at least twice the length of the body. This pattern indicates that, although sellers initially pushed the price lower, buyers stepped in later in the...
Explanation of Hammer Candlestick PatternThe Hammer candlestick pattern is a bullish reversal pattern that typically appears at the end of a downtrend. It signals that a stock may be nearing its bottom, suggesting that the sellers have exhausted their strength and buyers are starting to take control. The Hammer is characterized by a small real body at the top of the candlestick, with a long...
Explanation of Doji Candlestick PatternThe Doji candlestick pattern is a signal in technical analysis that reflects market indecision. This pattern forms when the opening and closing prices are nearly identical, resulting in a small or non-existent body. The Doji is typically characterized by long upper and lower wicks, signifying that price moved both higher and lower during the session but...
In trading, we often get attached to certain ideas and beliefs... then we inevitably find evidence to support those beliefs - this is called confirmation bias. Whether it's a strategy we've relied on for years, an indicator that's "never failed," or a pattern we think is rock solid—our brains love consistency and familiarity. But what if the best way to improve as a trader is to challenge those...