Investing - Top 5 most repeated mistakes: emotional bias


In this article, we will show how emotional bias can be detrimental to our investments. Excessive emotional involvement in trade might lead to a lack of common sense in your actions. Because emotions can impair your capacity to critically assess a situation, learning to apply objective analysis in trading can help you make fewer risky decisions.

Entering into deals for emotional reasons is not good for anyone. In this way, investors can lose the majority of their funds in a single day or week. After incurring losses, such investors forget everything they know about correct position sizing and risk management. They will trade as often as possible to make up for this loss, but this is not a good strategy - it may go well once or twice with a bit of luck, but not forever. This approach might result in more losses than gains. This will not only affect your bank account status, but also your confidence.

The financial market is a market like any other, and it is governed by rules other than personal feelings and emotions. If you are currently very stressed by your losses and you are thinking of making up for them, it will be much better for your budget to trade in smaller positions and reassess your risk management. This way, you will not upset your wallet through losses and it will help you make analytical decisions, too.