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Trader : Herman Bogaerts --- Tradersname : Freedom --- Portable : 0033.(0).683.13.99.99
E-Mail : Herman.Bogaerts@Wanadoo.fr --- Herman_Bogaerts@Yahoo.com
E-Mail : Herman.Bogaerts@Wanadoo.fr --- Herman_Bogaerts@Yahoo.com
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| Daytrader-Generation “No Gambling but True Working Tools to Achieve Profit” "Day-Trading, Business of the Future !" |
Confirmation Bias: Seeing Only What You Want to See
At this time of year, we may feel a little more stress than usual, and when we are stressed out, we may tend to see things the
way we want to see them, instead of the way they really are. Many have speculated as to the possible reasons for the rally, but
obviously, there are no guarantees. Since humans have a strong need to win, however, looking for established buying and
selling trends at the end of the year is a potential precursor for human error.
The confirmation bias occurs when we desperately need to see what we want to see in terms of market prices. In his book,
“Trade Your Way to Financial Freedom,” Dr. Van Tharp describes the powerful effects of the confirmation bias: “Most people
totally ignore the contradictory evidence, despite the fact that it is overwhelming…people search out what they want, and
expect to see, in the market. Most people, as a result, are not neutral with respect to the market, and they cannot go with the
flow. Instead, they are constantly searching what they expect to see.”
When trading at the end of the year, it’s vital to go with the flow. Don’t force yourself to see something that isn’t there.
Remember that nothing is a certainty. History only repeats itself occasionally, but we forget this axiom during times of stress.
When we are stressed out, as is common during the holiday season, we are often biased. There is a sense of comfort in
believing that the markets are more predictable than they actually are. Will the Santa Claus Rally happen in 2007 ? Maybe it
will. Maybe it won’t. Andrew Leckey of the Associated Press reports that there are good reasons to expect the Santa Claus
Rally this year: The economy seems to be coming out of a slump, stock prices have been relatively low all year, and worries
about hurricane damage, heating costs, and the burst of the housing bubble seem to have subsided for now. So maybe it will
happen this year. If it does happen, it’s wise to capitalize on it. But whatever you do, don’t fall prey to confirmation bias. Always
study the markets carefully. Look for contradictory information. Don’t make assumptions. You never know what the Federal
Reserve may do, or how good holiday retail sales will turn out in the end. Stay neutral. Be open to see what really happens
rather than merely seeing what you want to happen. Be aware of your tendency to see what you want to see during times of
stress. The more you are aware of the limitations of the human mind, the more you can work around your
limitations and trade with the mental edge you need to win.
way we want to see them, instead of the way they really are. Many have speculated as to the possible reasons for the rally, but
obviously, there are no guarantees. Since humans have a strong need to win, however, looking for established buying and
selling trends at the end of the year is a potential precursor for human error.
The confirmation bias occurs when we desperately need to see what we want to see in terms of market prices. In his book,
“Trade Your Way to Financial Freedom,” Dr. Van Tharp describes the powerful effects of the confirmation bias: “Most people
totally ignore the contradictory evidence, despite the fact that it is overwhelming…people search out what they want, and
expect to see, in the market. Most people, as a result, are not neutral with respect to the market, and they cannot go with the
flow. Instead, they are constantly searching what they expect to see.”
When trading at the end of the year, it’s vital to go with the flow. Don’t force yourself to see something that isn’t there.
Remember that nothing is a certainty. History only repeats itself occasionally, but we forget this axiom during times of stress.
When we are stressed out, as is common during the holiday season, we are often biased. There is a sense of comfort in
believing that the markets are more predictable than they actually are. Will the Santa Claus Rally happen in 2007 ? Maybe it
will. Maybe it won’t. Andrew Leckey of the Associated Press reports that there are good reasons to expect the Santa Claus
Rally this year: The economy seems to be coming out of a slump, stock prices have been relatively low all year, and worries
about hurricane damage, heating costs, and the burst of the housing bubble seem to have subsided for now. So maybe it will
happen this year. If it does happen, it’s wise to capitalize on it. But whatever you do, don’t fall prey to confirmation bias. Always
study the markets carefully. Look for contradictory information. Don’t make assumptions. You never know what the Federal
Reserve may do, or how good holiday retail sales will turn out in the end. Stay neutral. Be open to see what really happens
rather than merely seeing what you want to happen. Be aware of your tendency to see what you want to see during times of
stress. The more you are aware of the limitations of the human mind, the more you can work around your
limitations and trade with the mental edge you need to win.