Bias - futures trading

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Basically means a slant, a view about things that is slanted in one way or another. The general meaning is usually that the slant is incomplete, not thought-out, unreasonable, irrational or just wrong. It often includes the idea that it is held unconsciously due to social prejudice or mental error.

That is not what people who trade usually mean when they talk about their "bias" -- they mean pretty much the opposite: that they have worked out a probable outcome for the market based on their best assessment of the evidence. [A thesis, or preliminary assessment/idea would be better descriptions]

So every time a discussion of bias comes up on this forum, things get very confusing if it is not clear which of these is meant.

Here's Wikipedia:

"Bias is an inclination or outlook to present or hold a partial perspective, often accompanied by a refusal to consider the possible merits of alternative points of view. Biases are learned implicitly within cultural contexts. People may develop biases toward or against an individual, an ethnic group, a nation, a religion, a social class, a political party, theoretical paradigms and ideologies within academic domains, or a species. Biased means one-sided, lacking a neutral viewpoint, or not having an open mind. Bias can come in many forms and is related to prejudice and intuition."

(Ref: )

A "bias" in the usual, non-trader sense is a bad, irrational, usually unconscious belief that you should discover in yourself and get rid of, because it's harmful to yourself or others.

A "bias" in the common trader sense is just your preliminary estimate of what the market might do, and is not unconscious or irrational -- or harmful -- at all. [ie a thesis, or preliminary assessment/idea]. [a formed opinion about the market, but the trader being aware of their limited knowledge about it].

They both mean you have a slant on things, but in what way and how you got it is very different.

That's why sometimes you hear traders talk as if it is good to have a "bias" (because you know what you are looking for), while other traders talk as if it is bad to have a "bias," and you should get rid of it (because it is an error.)

Source (with edits):

[....................] means, comments added by opening contributor to Wiki entry

Cognitive Biases:
Know your biases
Gamblerís Fallacy
Biases about losses
Overconfidence Bias
Confirmation Bias
Anchoring Bias
Recency Bias
Hindsight Bias
Illusions of Control

Managing your cognitive biases:
Understand them.
Question how they could be affecting your decisions.
Plan to minimize them.

Cognitive biases are genetically/evolutionary hardwired in the human condition.
(see daniel kahneman & amos tversky: prospect theory)

Source (with edits):

The other thing about a "bias" in the sense of an expectation about the market is that you have to drop it once you have different evidence, otherwise it just becomes a "bias" in the sense of a harmful fixed belief.

Basically, we're talking about expectations here, which can easily kill you if you are wedded to them.

Created by  steve2222 , March 31st, 2016 at 04:20 AM
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