5Avoiding Confirmation Bias
Biases influence all human decision-making, so it’s important to be aware of how these preconceived notions can influence our behaviour and choices. Here are a few tips on how to reduce confirmation bias
Allow yourself to be wrong: If you want to get closer to objective truths, you have to be able to admit you were wrong, especially in the face of new data. If you can’t admit defeat, it makes you incapable of discovering new avenues in the stock market.
We’re typically more aware of our assumptions than of our biases, but like biases, assumptions often keep us away from understanding the flip side. It’s risky to presume that your assumptions are correct. Always test your hypotheses. You can do this by searching out disconfirming evidence of your theories and forming factually-supported arguments with new evidence that can further prove your point. Paper trade your hypothesis before you invest your actual money.
Beware of repetition: For emphasis, for intensity, for effect, things are repeated constantly. This tactic is actually a form of brainwashing wherein you begin to think that something is true simply because you’ve heard it so many times. Be aware of repetition and be especially sceptical of what powerful people tell you again and again and again.
