You are bullish on Bitcoin. You believe it is going to $150,000.
You open Twitter. You find three analysts agreeing with you. You feel validated.
You ignore the four analysts saying the opposite. You dismiss the bearish chart pattern forming. You explain away the falling volume.
You enter a long position. Price drops. You find more bulls to follow. You add to the position.
Price drops further. You are now looking only at weekly charts because they still look bullish. You have stopped looking at daily and hourly — they contradict your view.
This is confirmation bias — and every trader suffers from it.
Confirmation bias is the tendency to search for, interpret and remember information that confirms what you already believe — while ignoring information that contradicts it.
It is not a character flaw. It is how the human brain naturally works. The brain uses shortcuts to process information efficiently. One of those shortcuts is filtering out contradicting data.
In normal life this is manageable. In trading it is extremely costly.
Cherry picking indicators.
Your RSI says overbought. You ignore it.
Your moving average says bullish. You focus on that.
You are not reading the market — you are reading only the parts that agree with you.
Seeking validation from others.
After forming a view, you search for analysts or traders who agree.
Their agreement feels like evidence. It is not — it is just more confirmation bias.
Dismissing contradicting signals.
A bearish engulfing pattern forms on the daily chart.
You dismiss it — “that is just short term noise.”
You would not dismiss it if it were bullish.
Staying in losing trades.
The trade is losing. Evidence says the thesis is wrong.
Confirmation bias makes you search for reasons the thesis is still right.
You find them. You hold. The loss grows.
Because being right feels good.
Your brain releases dopamine when your beliefs are confirmed. It creates mild discomfort when they are challenged.
So the brain actively steers you toward confirming information — not because it is accurate, but because it feels better.
The market does not reward feeling good. It rewards being accurate.
Rule 1 — Always build the bear case.
Whatever your trade thesis — write down three reasons it could be wrong.
Force yourself to find the opposing argument before entering.
If you cannot find any — you are not looking hard enough.
Rule 2 — Look at the chart before reading any opinions.
Form your own view from the raw chart first.
Then read what others think — as a check, not as your primary analysis.
Rule 3 — Use a checklist with objective criteria.
A checklist removes interpretation. Either the criteria are met or they are not.
Confirmation bias thrives in subjective analysis. Objective rules starve it.
Rule 4 — Welcome contradicting information.
When you find analysis that disagrees with your trade — read it carefully.
If it changes your mind — that is a win, not a defeat.
The goal is to be right, not to feel right.
Rule 5 — Review your losing trades honestly.
For every significant loss — ask: what information did I ignore or dismiss?
The answer is almost always confirmation bias in action.
In the next topic we will study anchoring bias — the tendency to fixate on one number and let it distort all your decisions.