Atlas of Cognitive Biases #48 · Time, emotions and state. Emotion disguised as analysis
What it looks like in trading
your favourite market or setup seems safer
after a bad day everything looks threatening
decisions driven by euphoria or fear
An example from a session
After a great week every chart looks like an opportunity. After a poor one, every chart looks like a trap. The charts didn't change; the mood did.
What the research says
Finucane, Alhakami, Slovic and Johnson (2000): under time pressure, people judged risk and benefit as inversely related (something good = low risk), even though in reality they often go together. Paul Slovic and colleagues (2007) described the affect heuristic as a fast, emotional decision shortcut.