Anchoring Bias

Anchoring is when an arbitrary reference point distorts your judgment. In trading, the most common anchors are your entry price, the all-time high, the previous day's close, or any "important number" you saw recently. Once that number is in your head, you measure everything against it, even when it's irrelevant to current conditions. The most damaging anchor is your entry price. After entry, traders constantly compare the current price to where they got in: "It's down 20 pips from my entry, that's bad." But the market doesn't care about your entry. The relevant question is whether the current setup still has an edge — not whether you're up or down from where you bought. Professionals are trained to ignore their entry price after the fact. The exit decision should be based on fresh analysis of where the market is now, not on whether you're profitable or losing on the position.