Atlas of Cognitive Biases #10 · Randomness and probability. You remember the hits and forget the misses
What it looks like in trading
“When the TICK hits +1000 there's always a top” (remembered 3 times, forgotten 10)
believing in a lucky day of the week or time of day
an indicator that “always works” in screenshots
An example from a session
A trader is sure Mondays are their best days. After three months of journal data, Mondays don't stand out at all. They remembered two great Mondays in a row.
What the research says
Chapman and Chapman (1967) showed that even experienced clinicians saw links between drawing tests and diagnoses that weren't in the data, because they fitted their expectations. Hamilton and Gifford (1976) showed that we easily link rare events together in memory.
Seeing a relationship between things that aren't related, or are related more weakly than it seems. We remember the cases that fit the theory.
How does illusory correlation show up in trading?
Typical signs: “When the TICK hits +1000 there's always a top” (remembered 3 times, forgotten 10); believing in a lucky day of the week or time of day; an indicator that “always works” in screenshots.
Educational content, not psychological advice or an investment recommendation.