Familiarity bias in trading is a psychological tendency that leads investors to prefer assets and markets they know well, often at the expense of better opportunities elsewhere. Instead of objectively analyzing all available options, they stick to what feels...
The Framing Effect is a cognitive bias where the way information is presented influences decision-making, even when the underlying facts remain the same—a concept frequently explored in trading psychology. Imagine you’re at the supermarket and see two labels: “90%...
When traders find themselves in a losing position, logic should dictate an exit. But instead of cutting their losses, many double down, convinced that the trade will turn around if they just hold on (or buy even more). This is an escalation of commitment, a powerful...
Money illusion is an economic theory that suggests that people think in terms of absolute dollar values rather than real purchasing power. This happens because inflation and currency value changes aren’t always factored into decision-making—an oversight often explored...
Information bias is the tendency to seek excessive information, believing that more data leads to better decisions, even when the extra information is irrelevant or misleading—a behavior often addressed in trading psychology. We make thousands of decisions on a daily...
