Confirmation Bias

### Where the bias comes from The name is not a trading term. Psychologist Peter Wason coined it, and his 1960 paper "On the Failure to Eliminate Hypotheses in a Conceptual Task" shows exactly why it matters to you. Wason gave people the sequence 2-4-6 and asked them to work out the underlying rule. The real rule was simply *any three ascending numbers*. Most guessed something narrower, like "consecutive even numbers", then tested it by proposing 8-10-12, then 20-22-24. Every test came back yes. Most never proposed a triple designed to come back no. They collected confirmations until they felt certain, and announced a rule they were confident in and wrong about. Raymond Nickerson's 1998 review in *Review of General Psychology* called it [a ubiquitous phenomenon in many guises](https://journals.sagepub.com/doi/abs/10.1037/1089-2680.2.2.175), and put it among the most consequential biases in human reasoning. ### What it looks like on a chart You mark a bullish bias on EURUSD. From that moment the 15M break that suits you is "clean", and the 1H break that does not is "just a wick". DXY refusing to align becomes "lagging". The rejection candle that never quite printed becomes "close enough". None of this feels like bias. It feels like analysis. That is the whole problem: the bias does its work upstream of the part of your thinking you can actually hear. There is market evidence, not just lab evidence. Park, Konana, Gu, Kumar and Raghunathan surveyed 502 investors on South Korea's largest stock message board and found that those showing stronger confirmation bias were also more overconfident, expected more of their own performance, traded more frequently, and obtained lower realised returns. Hunting for agreement is not free. ### The test, before you click The counter is in the definition: before entering, write down what would invalidate the trade. Be specific enough that a screenshot could settle the argument. *If price closes back through the protected structure, I am wrong. If DXY turns against my bias on the 4H and Daily and the pair's own fundamentals do not back me up, I stand down.* If you cannot name the thing that would prove you wrong, you do not have a trade, you have a belief. Two habits in this system exist for exactly this reason. **Devils Advocate** forces you to argue the other side of your own setup before you risk money. The strict **BOS** rule (body closing through the swing by at least 50%, confirmed on neighbouring timeframes) exists so that "did it break?" is not a judgement call your bias gets to answer. ### The common mistake Running the invalidation test *after* entering. Once your money is on the line it stops being a test and becomes a search for reasons to hold. Do it while walking away is still free.