Trading Psychology · Lesson 11 · Beginner
Anchoring and Recency
You spot perception biases on the chart and derive stops and targets from market structure instead of from anchors.
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Anchors everywhere
Your entry price becomes the anchor for the fair level, even though the market does not know your entry. The all-time high anchors the target, round numbers like 100k anchor stops. A coin looks cheap just because it fell sharply from its high.
Recency
A 100x you just saw or a viral liquidation cascade feels more likely than it is. The antidotes are base rates from your own journal and a news diet.
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The key points at a glance
- Your entry price, the all-time high and round numbers anchor your judgment.
- The market does not know your entry.
- Stops and targets come from structure and volatility, not from anchors.
Deep dive
Anchoring: why your entry distorts your judgment
Anchoring is one of the most robust biases. Even a rigged wheel of fortune influenced estimates, and even judges were swayed by rolled dice when setting sentences. The anchoring index is often around 50 percent.
- Your strongest anchor is the entry price, which the market does not even know
- The all-time high anchors your target, round levels like 100k anchor your stops
- A coin is seen as cheap just because it fell sharply from its high
- O'Neil: 98 percent do not buy at a new high, even though that is where the winners start
Recency bias: the last 100x distorts your view
A 100x you just saw or a spectacular wick feels more likely than it is, because it is easy to recall. Your perception follows what was loud most recently, not the real frequency.
Two antidotes: base rates from your own journal instead of gut feeling, and a news diet, so that not every screenshot re-anchors your expectation.
Derive stops and targets from market structure
Stops and targets belong at structure and volatility, not at anchors. The stop sits behind the relevant swing, the target at the next structural resistance, not at a round number, your entry, or a wished-for profit.
Sources: Kahneman, Goodman, Elder, Murphy
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