Confirmation bias and the trading this week in SLV

BellaMike Bellafiore's (Bella's) Blogs1 Comment

From Ian Leslie in his blog why is reasoning really all about winning:

It’s been shown again and again in studies that we have a very strong ‘confirmation bias’; once we have an idea about the world we like (Obama is un-American, my girlfriend is cheating on me, the world is or isn’t getting warmer) we pick up on evidence we think supports our hypothesis and ruthlessly disregard evidence that undermines it, even without realising we’re doing so.

If you were convinced Silver was going to bounce this week, did confirmation bias infect your trading?  The statement above is so scary for us as traders.  Our decisions affect our financial reality per month.  And yet we can sit in our trading seats, intake trading data, and disregard the evidence opposite to our trading positions?

There was an excellent Bounce Trade opportunity in SLV on Thursday at it bottomed near 35.25.  I know of many excellent traders who made this play.  But when SLV did not trade higher and made new lows below 35.25, getting long is perhaps you suffering from confirmation bias as an intraday trader.  Just because you think it should trade higher does not mean that is the information that the market is offering.

Mike Bellafiore

Author, One Good Trade

One Comment on “Confirmation bias and the trading this week in SLV”

  1. excellent post on the pitfalls of confirmation bias and definitely effected the P/L of thousands trading SLV this week. another great reason why tape reading is the most effective analysis tool around. “there is no bull or bear side of the market, only the right side.”

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