Anthony Anthony D Rivera

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What is confirmation bias in forex trading and how does it affect decisions?

Confirmation bias is the tendency to favor information that supports existing beliefs while ignoring contradictory evidence. In forex, a trader bullish on EUR/USD may only seek bullish news, overlooking signals of weakness. Institutions combat this by enforcing team-based reviews and model validation. Retail traders often fall into the trap of “cherry-picking” indicators. Benefits: temporary confidence. Risks: distorted analysis, poor entries, and amplified losses. The solution is structured journaling and deliberately seeking opposing views. Confirmation bias shows that markets punish narrow thinking—success requires objectivity and openness to all evidence, not just what feels comfortable.