A cognitive bias, generally described in layman’s terms as irrationality, rears its ugly head with every decision we make. It does so because there are numerous cognitive biases, particularly when decisions are required under duress or in an environment of uncertainty, much like we find when making stock trading decisions, where uncertainty is ever present and the pressure to act and react a constant variable.
The studious trader knows that technical analysis serves little purpose when cognitive bias is ignored. The studious trader studies the market for sure but only after an honest self study.
The following articles on cognitive biases can help each of us study the self and, in turn, better help us navigate and understand the charts our very biases create in the first place.
A visual study guide to cognitive biases.
Investors’ 10 Most Common Behavioral Biases.
“Some social psychologists believe our cognitive biases help us process information more efficiently, especially in dangerous situations. Still, they lead us to make grave mistakes. We may be prone to such errors in judgment, but at least we can be aware of them.” The 12 Cognitive Biases That Affect Your Rationality
“Perception is reality in the financial markets.” 12 Ways Traders Let Their Brains Get in the Way of Rational Investing
“In the highly anticipated Thinking, Fast and Slow, Kahneman takes us on a groundbreaking tour of the mind and explains the two systems that drive the way we think.” Daniel Kahneman-How We Think.
“Becoming mindful of these common cognitive distortions will help you understand yourself and other people better, and improve your decision making.” (50 Common Cognitive Disorders)
“All else being equal, not many people would prefer to destroy the world.” (Cognitive Biases Potentially Affecting Judgment)