โ ๐๐ป๐ฐ๐ต๐ผ๐ฟ๐ถ๐ป๐ด ๐๐ถ๐ฎ๐
What is Anchoring Bias?
It is the human tendency to rely too heavily on the first piece of information we receive (the "anchor"). In trading, that anchor is usually the price at which you bought.
Imagine you bought shares of a tech company at $100. Months later, the company loses key contracts, the sector shifts, and the stock drops to $60.
Your mind tells you: "Iโm not selling, because itโs worth $100."
Error. The market says itโs worth $60. The $100 is just a number in your memory, but your brain has remained "anchored" to the past.
๐ The danger of "waiting to break even"
Anchoring turns us into prisoners of our own losses. It prevents us from being objective for three reasons:
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Price vs. Value: We confuse what we paid with what the asset is actually worth today. The market doesnโt know (nor does it care) at what price you bought in.
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Opportunity Cost: While you wait for your "anchor" to resurface, your capital is trapped, missing out on gains from assets that are actually trending upward. ๐ธ
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Averaging down without a strategy: Many investors buy more simply because itโs "cheap" compared to their initial anchor, without analyzing if the company's fundamentals are broken.
๐ ๏ธ How to drop the anchor
To survive on eToro, where volatility is constant, you must learn to cut the rope:
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The "Day 1" Question: Look at your portfolio today. If you had no open positions and were holding that amount in cash, would you buy that stock at its current price? If the answer is "no," your only reason for staying is the anchor.
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Accept the current market: Yesterdayโs price is history. Todayโs price is the only reality.
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Use Stop-Losses (mental or real): Decide your exit point before your emotions and the anchor take control.
"The anchor is a defense mechanism to avoid admitting a loss. But in the market, the greatest loss isnโt the moneyโitโs the time you spend waiting for the past to repeat itself."