Invest2see Review: Know the behavioural biases in trading [invest2see.com]

Making hard and fast decisions is not always an easy task. Oftentimes we make decisions depending fully on our emotions. Sometimes our decisions are fruitful, and bring good results for us. Other times we regret our decisions and wish we could go back and change them. The same thing happens in the case of Forex trading. Traders often don’t realise that they are making decisions heavily based on their emotions. This results in making wrong decisions and significant losses. Even though popular trading platforms like Invest2see provide traders with the necessary advanced tools for market analysis and trade execution, traders still make wrong decisions sometimes. In order to avoid this issue, it is important to learn and understand about behavioural biases in trading. This article will help you to familiarise yourself with the common behavioural biases. So, let’s get into this. 

What are behavioural biases?

Behavioural biases are psychological tendencies of the human mind that affect an individual’s decision-making process leading to faulty or even fatal outcomes. These biases can be the result of innate human traits including emotions, social influence and cognitive flaws. These biases in trading can lead to a disastrous outcome where you can lose all your capital with a single mistake. In an industry, where the financial stake is extremely high, it is important to keep these behavioural issues under proper control. So, let’s take a look at these biases and also learn how to take control of them. 

1. Overconfidence bias

Traders become prey to the overconfidence bias when they overestimate their ability to understand and predict the market movement and act upon it. In this context, overconfidence bias can be of two types: overconfidence in the exactness of the information and overconfidence in the ability to make perfect decisions based on the information. Research shows that traders are more often prone to making investments in one particular asset and fail to create diverse portfolios. This significantly increases the chances of risk. You can avoid this bias by becoming more observant and diversifying your portfolio. Observe the market movement for a long time before making your decision. Also, take advantage of a large amount of tradable assets available on the Invest2see platform to diversify your portfolio. This is gonna help you a great deal.

2. Eagerness to chase trends

Another strong bias in Forex trading is the trend-chasing bias. Trend chasing means when a trader makes his/her decisions heavily based on the previous year; ‘s performance. Even though the previous year’s performance does not reflect the future, traders make this mistake very commonly. This is not fruitful for long-term gain. To avoid this bias don’t blindly follow the previous year’s trend. Analyse the market with the advanced tools available on the Invest2see platform and then take your decision.

3. Confirmations bias 

Confirmation bias is the tendency to fully believe in the information that confirms our pre-existing beliefs while completely ignoring the information that contradicts them. This results in significant losses. To avoid this bias traders should put equal importance on all types of importance and make their decision after a proper analysis.

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