Dentro l'articolo

Introduction

The bias of confirmation trading appears when you have already decided what the market should do and start looking for information that support that conclusion.

If you are long, note media, positive data and rialziste analysis. The contrary information seems less important. The problem is not having a thesis: it is to stop seriously seeking what could invalidate it.

The real problem

In trading you can almost always find a reason to support an idea already formed.

An indicator is rialzista, another is neutral, a news can be interpreted in different ways. If you select only what gives you reason, five “confirms” can be simply five different ways of repeating the same conviction.

This distinguishes the confirmation bias from the normal commercial: a checklist seeks evidence before deciding; the bias decides before and filters the tests after.

Because it happens

Once you open a position, admit that the idea might be wrong becomes psychologically more difficult.

The trader is no longer considering the market: it is defending a decision already taken.

He therefore seeks compatible analysis, interprets the news favorably and attaches less weight to the contrary signals. The more emotional or economic exposure grows, the more it can become difficult to change your mind.

The most common errors

A typical error is to read a lot of opinions until you find one that matches yours.

Another is to consider each favorable movement a confirmation and every opposite simple “noise”.

The bias can also lead to shifting the validation: the level that would first prove that the setup was wrong suddenly becomes something to be ignored.

What to do in practice

Before the entrance you write two things: because the trade makes sense and what would prove that the thesis is no longer valid.

Then deliberately try to build the opposite case.

If you want to buy, ask what elements support a rebassist scenario. If you want to sell, look for what might invalidate the short.

The disciplinary in trading also includes the ability to accept information that does not confirm what you want to see.

Example concrete

Trader A wants to enter long. Find three uprising elements and open the position.

The price subsequently breaks a level that had considered important, but seeks new positive analyses and decides that “the market is only taking liquidity”.

Trader B starts from the same idea, but before the entrance it also records the level that would invalidate the thesis.

When that level is broken, it must not invent a new explanation: apply what it had decided when it was still neutral.

How a trading journal can help

A trading journal allows you to save the motivation before you know the result.

It records initial thesis, favourable evidence, contrary elements, planned invalidation and reasons for any changes.

After the trade compares what you wrote with what really happened.

This reduces the risk of rewriting history: after a win it is easy to remember only the correct reasons; after a loss it is easy to say that “it was actually obvious”.

Where does Disciply

Disciply can connect Journal, Decision Impact Map and Score Discipline to compare what you had decided before the trade with the next behavior.

The analysis of trading performance thus becomes something more than the P&L: you can observe if ignorant often invalidations, change the narrative during the trade or respect the conditions defined initially.

The goal is not to tell you which scenario is correct. It is more difficult to retroactively change the reasons for the decision.

FAQ

**Having many confirmations eliminates confirmation bias? * *
No. If you chose confirmations because they support a conclusion already taken, the number does not solve the problem.

**How can I know if I'm just looking for favorable evidence? * *
Try to explain exactly what would make your thesis wrong.

**The confirmation bias only concerns open trades? * *
No. It can start already during the analysis, when you select only consistent information with the direction you prefer.

Conclusion

The bias of trading confirmation is not to have a conviction. It consists in protecting that conviction from the information that might deny it.

A serious process must allow you not only to build a thesis, but also to know clearly when to abandon it.

Key points

  • Decide first and search for evidence after distorting the analysis.
  • More confirmations do not necessarily mean more objective.
  • Validation should be defined when you are still neutral.
  • Recording the motivations before the result reduces the rewriting of the trade.
  • A good process also seeks information contrary to your idea.

/ Final CTA

Before the next trade, don't just write because you think you're right. Write what should happen to prove you're wrong.