⚓ Anchoring Bias
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: "I’m not selling, because it’s worth $100."
Error. The market says it’s worth $60. The $100 is just a number in your memory, but your brain has remained "anchored" to the past.
📉 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 doesn’t 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. 💸
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Averaging down without a strategy: Many investors buy more simply because it’s "cheap" compared to their initial anchor, without analyzing if the company's fundamentals are broken.
🛠️ 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: Yesterday’s price is history. Today’s 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 isn’t the money—it’s the time you spend waiting for the past to repeat itself."