Daniel William_ Moore#98

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What is confirmation bias and how does it affect forex decision-making?

Confirmation bias is the tendency to seek and favor information that supports existing beliefs while ignoring contradictory evidence. In forex, this bias leads traders to cling to bullish outlooks on EUR/USD even when data points bearish. It causes selective news reading, overconfidence in losing trades, and reluctance to adapt. Institutions mitigate bias by using team decision-making, devil’s advocate reviews, and quantitative models that override opinions. Retail traders can counter bias by deliberately reviewing opposing analysis, journaling trade rationale, and setting objective stop-losses. Risks: confirmation bias blinds traders to reality, compounding losses. Recognizing it is essential because markets reward flexibility, not stubbornness. By confronting confirmation bias, traders align decisions with evolving data rather than personal attachment.