How to Overcome Confirmation Bias: Why You Should Try to Disprove Your Best-Loved Trading Ideas

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 ideas? This is where James Clear’s advice comes into play:

“Try to disprove your best-loved ideas.”

At first, this might sound counterintuitive. Why on earth would you want to disprove something you believe in? Well, when it comes to trading, this concept is not only crucial—it’s transformative. Let’s break down how and why challenging your favorite trading ideas could be the key to long-term success and profitability.

Why We Get Attached to Ideas in Trading

You’ve likely been there: you find a trading system that works (or seems to work), and suddenly it feels like you’ve struck gold. This idea becomes a cornerstone of your trading approach. Maybe it’s a favorite indicator, like RSI or MACD, or a setup you stumbled upon that seems to generate wins. Naturally, you start to rely on it.

This is where the danger creeps in. Human nature tends to embrace confirmation bias—we seek out information that supports what we already believe and ignore the rest. In trading, confirmation bias can lead us to filter out signals that our system might not be as solid as we think. We want to be right, so we reinforce ideas that align with our trading strategies, often without realizing that they might need re-evaluation.

But here’s the thing: the market doesn’t care what you believe. The market is constantly shifting, and clinging to ideas without testing them rigorously can lead to devastating losses. This is why trying to disprove your favorite trading ideas isn’t just a mental exercise—it’s a survival skill.

Why Trying to Disprove Your Ideas Works

Disproving your ideas forces you to be objective. It’s like being your own devil’s advocate. If you can’t find any legitimate reason to abandon a particular system after rigorous testing, then it might be as solid as you think. But if there are cracks in the foundation, it’s better to find them now, when the stakes are lower, rather than during a major market drawdown.

When I started trading, I developed a system I was proud of. It performed well in a bull market, and I believed it could weather any storm. But then came the bear market, and I started seeing drawdowns. At first, I dismissed them, chalking it up to temporary volatility. But the losses continued. Finally, I took a step back and realized I had become emotionally attached to a system that wasn’t working in all conditions.

That’s when I learned the value of backtesting across multiple market cycles. My original system wasn’t flawed, but it wasn’t built for every scenario. By trying to disprove its effectiveness, I was able to refine it into something much more reliable.

How to Actively Disprove Your Trading Ideas

Here’s how you can get started on challenging your own trading ideas:

1. Backtest Across Different Market Conditions

The system that thrives in a bull market might falter in a bear or sideways market. It’s essential to backtest your strategies over various timeframes and market conditions to see how they hold up. If they start showing signs of weakness, you’ll know that they may need adjustment and/or you need other systems in your portfolio.

In our Trader Success System, we emphasize the importance of testing systems over decades of data across multiple market phases. If your portfolio doesn’t show consistent profitability in both good and bad markets, that’s a red flag.

2. Keep a Trading Journal and Analyze Mistakes

One of the secrets to successful trading is being brutally honest with yourself. Keep a journal where you not only log your trades but also document any deviations from your system, emotions felt during the trade, and any mistakes you made. This is crucial in identifying confirmation bias and removing it from our trading.

As we teach in our program, systematically eliminating mistakes is one of the fastest ways to increase profitability. If you find yourself consistently ignoring certain signals or bending the rules, you may be favoring a flawed system.

3. Seek Contrarian Views

Actively look for evidence that contradicts your trading strategy. This might involve testing different indicators, reading market analyses that go against your positions, or discussing your ideas with traders who use completely different approaches. The goal isn’t to prove them wrong but to see if they have valid points that you may have overlooked.

Engaging with our community of traders through the Trader Success System is an excellent way to get these contrarian views. Often, other traders can spot blind spots you didn’t even know existed.

4. Limit Your Risk Exposure Until Proven

Until you’ve thoroughly tested your strategy and tried to disprove it, keep your risk exposure low. This is especially important if you’re testing a new idea or adapting an existing system to different markets, like adding cryptocurrencies to your portfolio.

Limiting risk doesn’t just protect your capital—it also helps you maintain the confidence to continue trading without being overwhelmed by fear of large losses.

5. Continuous Learning and Adaptation

Markets evolve. What works today might not work next year. The most successful traders are those who continuously learn and adapt their systems. Whether through formal education, books, or mentorship, it’s crucial to stay on top of changes in the market.

This is why our program is designed to grow with you. We don’t just give you one system and send you on your way—we provide the tools and community support necessary for continuous improvement.

The Rewards of Challenging Your Beliefs

There’s a certain freedom in not being tied to a single idea or system. When you’re willing to challenge your own beliefs, you become more flexible and adaptable. This adaptability is a trader’s greatest asset because the market doesn’t stay still—it’s always shifting.

By regularly testing, challenging, and evolving your strategies and portfolio, you not only become a better trader but also develop the confidence to navigate even the most volatile markets. And that confidence—real, grounded confidence—frees you from the stress of wondering whether you’re doing the right thing.

So, the next time you find yourself clinging to a particular trading strategy or idea, accept that you may be suffering from confirmation bias, take a step back and ask: “What would it take for me to disprove this?” You might just discover that the very act of questioning leads you to a breakthrough.

Remember – You are only one trading system away!

Adrian

Founder – Enlightened Stock Trading