Anchoring bias occurs when traders fixate on a specific reference point — such as their entry price, an all-time high, or a round number — and make subsequent decisions relative to that anchor rather than evaluating current market conditions objectively. This bias leads to irrational behaviour such as refusing to sell a losing position because the anchor (entry price) feels more 'real' than the current price.
Entry price anchor: evaluating a position based on entry cost rather than current risk/reward. Historical anchor: fixating on an asset's all-time high or a previous price as the 'correct' value. Round-number anchor: giving undue significance to prices like 100, 1000, or 50000. Adjustment failure: insufficient adjustment from the initial anchor when new information arrives. Anchoring affects both entry and exit decisions.
Before entering, ask: 'Would I enter this trade if the price had always been at this level?' Remove historical context from your analysis of the current setup. Use objective criteria (momentum, structure, volume) rather than comparisons to past prices. Evaluate risk/reward from the current price, not from where the asset 'used to be'.
Manage trades based on current technical levels and risk/reward, not on your entry price. Delete entry-price lines from your chart to reduce the anchor's visual pull. Reassess positions weekly by asking: 'If I had no position, would I enter here now?' Use predetermined stop levels that are set before entry and not adjusted after.
Applicable across all timeframes and during all trade management decisions
The most insidious form of anchoring in crypto is fixating on an asset's all-time high — buying an asset at 90% below ATH feels like a bargain, but it tells you nothing about current value or risk. Train yourself to analyse every chart as if you are seeing the asset for the first time. Use checklists and pre-defined criteria to reduce the influence of anchors on your decision-making.
Confirmation bias is the tendency to search for, interpret, and remember information that confirms your existing beliefs while ignoring contradictory evidence. In trading, this means once you form a bullish or bearish view, you unconsciously filter information to support your position — ignoring warning signs and overweighting supportive data.
Hindsight bias is the tendency to believe, after an event has occurred, that you predicted or expected the outcome all along. In trading, this manifests as reviewing charts after the fact and feeling certain that the signals were obvious, leading to overconfidence in future predictions and an underestimation of real-time uncertainty. This bias distorts trade journaling and prevents genuine learning from both wins and losses.
FOMO (Fear Of Missing Out) drives traders to enter positions impulsively because they see prices rising or because social media is buzzing about an asset. Herding behaviour — following the crowd — amplifies FOMO by creating social proof. Together, these biases cause buying at tops and chasing momentum that's already exhausted.
Loss aversion, a cornerstone of Prospect Theory developed by Kahneman and Tversky, states that the psychological pain of losing is approximately twice as powerful as the pleasure of an equivalent gain. In trading, this manifests as: holding losers too long (hoping they'll come back), cutting winners too short (fear of giving back gains), and avoiding trades after recent losses.