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Sensory-derived bias is a psychological phenomenon that falls within the scope of trading psychology. A subset of trading instincts, one of three more specifically, this bias is said to refer to the idea that the information that we use to form opinions is biased.
The obvious challenge here is recognising that information that we perceive as fact may actually be steeped in some form of bias. This is of particular concern if one considers that we use information around us to function day to day, or to acquire specific knowledge.
In the context of trading, the source of information is of particular importance, as is the messaging. For example, a trader may follow a particular media outlet to monitor the markets.
Based on the information that the specific outlet provides its audience everyday, the trader may formulate a specific opinion stemming from what he considers to be fact.
What the trader may not realise, however, is that the media channel may be presenting certain information based on its own sets of biases, which in turn influence the opinion of the person listening to them. This may become further exacerbated if only one side of a story is being presented. The more one hears just one part of a tale, without any evidence to the contrary, eventually that tale has the potential to turn into the only practical stance on the subject. This creates a biased opinion due to a lack of counter evidence.
It requires a concerted effort to not fall prey to biases like sensory-derived bias. However, being mindful or aware of their influence on trading decisions is half the battle. The other half is taking the steps to limit psychological obstacles. This looks like something as follows:
Set achievable goals to manage expectations more effectively, but also acknowledge that mistakes are a part of the process.
T4Trade, with registered address of F20, 1st Floor, Eden Plaza, Eden Island, Seychelles, is a trade name of Tradeco Limited.
The Group includes Damadah Holding Limited with registered address at 365, Agiou Andreou, Efstathiou Court, 2nd Floor, Flat 201, 3035 Limassol, Cyprus.
Tradeco Limited is authorised and regulated by the Seychelles Financial Services Authority with licence number SD029.
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Thank you for visiting T4Trade
This website is not directed at UK residents and falls outside the European and MiFID II regulatory framework, as well as the rules, guidance and protections set out in the UK Financial Conduct Authority Handbook.
Please click below if you wish to continue to T4Trade anyway.
