CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 87.41% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.

Scan to Download iOS&Android APP

What is bias?

More info on bias below
Share this article

Bias in trading is a psychological phenomenon, in which an investor makes a decision based on their pre-conceived ideas of what will or won't work without considering the evidence. Bias may also manifest itself in retaining an asset for too long or otherwise behaving against their best interests.

Where have you heard about bias?

As an investor, you may have been warned against bias by your financial adviser. Investment guides may discuss the danger of bias, and the subject is covered from time to time by specialist financial media.

What you need to know about bias...

One of the most common forms of bias is called confirmation bias, in which the investor will seek out evidence that seems to support their pre-conceived position. The famous investor, Warren Buffet, has discussed the problem of confirmation bias, one of the most common forms of bias. He says in order to avoid it, investors should:

  1. Be aware of the danger of confirmation bias, and acknowledge that their judgement can be clouded by it.
  2. Aggressively seek out and understand information that disagrees with their existing belief.

Another form of bias is sunk cost bias. This can occur when someone has invested so much money, time or energy into a particular venture or investment that they will keep going without cutting their losses, despite its repeated failure to deliver. Remember – an investment doesn't 'owe' you anything.

Related Terms

New to trading? Learn to trade with Capital.com

Related articles

View all articles

Still looking for a broker you can trust?

Join the 475.000+ traders worldwide that chose to trade with Capital.com

1. Create & verify your account 2. Make your first deposit 3. You’re all set. Start trading