Behavioral biases

by Feb 21, 2019General0 comments

What are behavioral biases? Simply stated, it is a behavior that can lead to wrong decisions. As you can realize, this is very important in trading, because wrong decisions means losing money. So how can we identify behavioral biases, and how to address them?

behavioral biases

First thing first, there are two main types of behavioral biases:

  • emotional biases – where feelings influence your ability to make correct decisions
  • cognitive errors – that are caused by faulty reasoning.

If you remember the previous article on NLP, you can now realize even more why emotions management is very important. We cannot eliminate all the behavioral biases, but being aware that they exist and having some techniques to mitigate them can make the difference.

In the next articles, we will discuss some of the main emotional biases and cognitive errors. Stay tuned!