Understanding your trading biases will help you understand the market more. This is because trading is all about taking the right decisions so you are able to make profits consistently.

Your trading bias usually comes out to play when your money is at risk or there is a perceived opportunity to make a huge profit.

As a trader, you need to be able to think clearly without involving any emotions. So, that is why you need to know these common trading bias to be able to recognise when your decisions are been influenced.

Here are few examples of a trading bias:

1) Optimistic/Pessimistic bias:

These kind of traders get super optimistic or pessimistic based on the past results of the previous trades.

If they made profits, they felt good and entered the market with a bigger trading capital. If they lost money, they were not happy and will re-enter another trade with a reduced trading capital.

These emotional roller coaster is often based on the Fear and Greed. The way to overcome this bias is to have a "right perspective" that there will be good days and not so good days in trading.

This is because people are constantly trading in the market and there are a lot of potential factors that could affect the trade.

So, even when you take a loss in the market, you see it as a lesson by trying to understand what factors played out to cause that result.

When you make profits, that is not the time to increase your capital, but to take some time off and then slowly make your entry back into the trading again.

2) Overconfidence bias:

There are times when you will be so sure bitcoin will drop in price, because based on your knowledge of the market and analysis you perceive it to be a done deal.

You launch your trade and the market goes up in price. This is what the overconfidence bias looks like, because when you are so sure the market will go a certain way that you seem to overlook any other idea.

Trading is about predicting the next move, which is why you must entertain other scenarios where your trade doesn't go as planned and have a risk management strategy in place.

3) Confirmation Bias:

This tends to be the standpoint that solidifies the overconfidence bias. If you think the market might go up in price, you may look for information that will support that idea.

Look at the information you see from all angles before making a decision. Try to not make your decision until you have clearly analysed different information from different sources.

4) Bandawagon Bias:

This is the "Fomo" mentality that makes traders think because everyone is talking about a crypto asset that means its a good time to buy it. These "herd" way of thinking can be hard to resist but don't fall for it.

5) Familiarity Bias:

This bias is all about doing what you have done countless times even when it stops working. Just because a strategy worked well for you in the bear market doesn't mean it will be good to continue the same process in the bull market.

You need to be able to adjust to market situations and adapt to new trading strategies.