Behavioral Principle
Confirmation Bias
Investors seek out and remember evidence that supports the position they already hold.
Canonical source: Wason, 1960
Articles studying this principle
Stabilization Bias: Why Sideways Markets Feel Safer Than They Are
After a sharp decline, markets often move sideways before making their next major decision. Traders mistake the absence of selling for the presence of buying, creating a dangerous sense of stability. Stabilization Bias explains why quiet markets frequently produce the most expensive decisions—not because the trend has changed, but because confidence has.
The Safest-Looking Chart Is Sometimes the Most Dangerous
Three indicators agreed. The structure looked healthy. Confidence returned. Then one candle erased everything traders thought they knew. False certainty doesn't happen because indicators fail. It happens because traders stop questioning them.