Atlas of Cognitive Biases #23 · Information and beliefs. Your entry price means nothing to the market
What it looks like in trading
the entry price as a reference point: “I'll get out when it comes back to my price”
yesterday's high as a target because “that's where it was”
round numbers treated as “important” without any data
An example from a session
A trader bought at 51,500. Price falls to 51,300, and they wait for it to “get back to 51,500”. That number means nothing to the market. It only matters to their account.
What the research says
Tversky and Kahneman (1974) spun a wheel of fortune that landed on 10 or 65, then asked about the percentage of African countries in the UN. The median answer was 25% after “10” and 45% after “65”, even though the number from the wheel was obviously random.
Basing a judgement on the first number you notice, even a random one, and not adjusting away from it enough.
How does anchoring show up in trading?
Typical signs: the entry price as a reference point: “I'll get out when it comes back to my price”; yesterday's high as a target because “that's where it was”; round numbers treated as “important” without any data.
Educational content, not psychological advice or an investment recommendation.