{"id":1564,"date":"2009-07-24T17:37:47","date_gmt":"2009-07-24T22:37:47","guid":{"rendered":"http:\/\/www.smbtraining.com\/blog\/?p=1564"},"modified":"2009-07-25T12:21:17","modified_gmt":"2009-07-25T17:21:17","slug":"confirmation-bias","status":"publish","type":"post","link":"https:\/\/www.smbtraining.com\/blog\/confirmation-bias","title":{"rendered":"Confirmation Bias"},"content":{"rendered":"

Today I fought confirmation bias. \u00a0Confirmation bias is processing information in the market so that it fits your preconceived opinions. \u00a0You overvalue all the information that backs your preconceived thoughts. \u00a0You ignore all the information that counters your belief. \u00a0 @steenbab<\/a> (Twitter handle)\u00a0and @thekirkreport<\/a> have written about confirmation bias in their blogs previously. \u00a0I wanted to share how I had to fight confirmation bias today trading AMZN. \u00a0 And what a fight it was.<\/p>\n

My partner Steve Spencer wrote a killer blog last night about how AMZN might trade today. \u00a088.80 was the mother of all levels in the After-Hours right after AMZN reported. \u00a0Those were some nice shorts for us. \u00a0Chop SMB! \u00a0So 88.80 was a significant resistance level for the SMB desk on the open. \u00a0And Steve shared this important level.<\/p>\n

So what happened today in AMZN? \u00a0AMZN traded right to 88.80 today and failed. \u00a0How do you do it Spencer? \u00a0We were armed with this significant resistance level. \u00a0I started a longer term intraday short. \u00a0I was not covering until there was a Reason the Cover.<\/p>\n

In the After-Hours AMZN held 88.80 and then traded down to 85. \u00a085 held the bid after significant volume. \u00a0So we had our levels. \u00a0And now I am short AMZN after the fail of 88.80 on the open and I am just convinced that 85 is AMZN’s next stop. \u00a0Every held bid HAD to get run over. \u00a0My confirmation bias was in the house.<\/p>\n

At 87.40 repeated buying offered support. \u00a0And my confirmation bias strangled my thoughts:”These guys are idiots for buying here.” \u00a0But having struggled with confirmation bias in the past, I observed my behavior. \u00a0I needed to see the screen objectively. \u00a0So I acknowledged my confirmation bias, quieted my mind, and just read the order flow along with my charts.<\/p>\n

And I covered some AMZN. \u00a0 Below 87.40 I would reshort some more. \u00a0But right now, for my trading system, AMZN was a cover for 2\/3 of my position. \u00a0But only through observing my thoughts and recognizing that I can suffer from confirmation bias was I able to make a quality trading decision.<\/p>\n

Now AMZN did trade below 87.40 and I reshorted the 2\/3 that I had covered. \u00a0But I was in complete control of my trade because I recognized my confirmation bias and covered. \u00a0And then I reshorted when the reshort was proper. \u00a0If AMZN had reversed at 87.40 I would have profited. When AMZN traded lower I profited. \u00a0Take that confirmation bias.<\/p>\n

And then came 86. \u00a0Now remember my bias was for AMZN to trade down towards 85. \u00a0What was this 86 buyer doing? \u00a0Again I thought, “What an idiot.” \u00a0But AMZN would not trade below 86. \u00a0And so I covered 2\/3 of my position again. \u00a0Another good decision.<\/p>\n

I was perusing Twitter into the close and noticed @downtowntrader chirp HGSI. \u00a0My alerts are set for 15 in HGSI. \u00a0I concluded that HGSI would not be ready for a new leg up until it held above 15. But then I started reading that @downtowntrader was long. \u00a0And I typed up HGSI and gave it a look. \u00a0At 14.70 I did not like how the offers were not being cleared. \u00a0So I did not buy. \u00a0 But this second opinion, my willingness to accept another’s point of view, offered another buying opportunity into the close. \u00a0 And now HGSI is back on my radar. \u00a0And this is just another example of how I fought and conquered my confirmation bias during today’s trading session.<\/p>\n

We all fight confirmation bias. \u00a0But it will harm our performance<\/a> if we do not overcome it. \u00a0 Use StockTwits to gain second opinions. \u00a0If you are fortunate like I am to be surrounded by talented traders, listen to their thoughts. \u00a0This does not mean mimic other traders. \u00a0Just consider another opinion. \u00a0Do you know how many times I have heard Steve chirp a position that was opposite of mine? \u00a0That did not mean I automatically flipped my position. \u00a0It just gave me some valuable color on what someone else was seeing with this stock. \u00a0 These other opinions will help you fight confirmation bias.<\/p>\n

Talk to you tomorrow. \u00a0Enjoy your evening! Don’t forget to follow us on Twitter!<\/a><\/p>\n

\"AMZN<\/p>\n","protected":false},"excerpt":{"rendered":"

Today I fought confirmation bias. \u00a0Confirmation bias is processing information in the market so that it fits your preconceived opinions. \u00a0You overvalue all the information that backs your preconceived thoughts. \u00a0You ignore all the information that counters your belief. \u00a0 @steenbab (Twitter handle)\u00a0and @thekirkreport have written about confirmation bias in their blogs previously. \u00a0I wanted to share how I had … Read More<\/a><\/p>\n","protected":false},"author":144,"featured_media":0,"comment_status":"open","ping_status":"open","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[1,10],"tags":[30,18,311],"class_list":["post-1564","post","type-post","status-publish","format-standard","hentry","category-general-comments-2","category-mike-bellafiore-bellas-blogs","tag-prop-trading","tag-smb-capital","tag-stocktwits","no-post-thumbnail"],"yoast_head":"\nConfirmation Bias | SMB Training<\/title>\n<meta name=\"robots\" content=\"index, follow, max-snippet:-1, max-image-preview:large, max-video-preview:-1\" \/>\n<link rel=\"canonical\" href=\"https:\/\/www.smbtraining.com\/blog\/confirmation-bias\" \/>\n<meta property=\"og:locale\" content=\"en_US\" \/>\n<meta property=\"og:type\" content=\"article\" \/>\n<meta property=\"og:title\" content=\"Confirmation Bias | SMB Training\" \/>\n<meta property=\"og:description\" content=\"Today I fought confirmation bias. \u00a0Confirmation bias is processing information in the market so that it fits your preconceived opinions. \u00a0You overvalue all the information that backs your preconceived thoughts. \u00a0You ignore all the information that counters your belief. \u00a0 @steenbab (Twitter handle)\u00a0and @thekirkreport have written about confirmation bias in their blogs previously. \u00a0I wanted to share how I had ... 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