Anchoring
Also known as: anchoring bias, entry-price anchoring
Anchoring is the bias that makes the first number a brain sees disproportionately influence subsequent judgments, surfacing in trading as treating an entry price, prior high, or round number as if it had predictive meaning.
Anchoring was named by Kahneman and Tversky after experiments in which spinning a wheel of random numbers measurably moved subsequent estimates of unrelated quantities. The brain reaches for any available reference and treats it as informative even when it is not.
In trading, the most expensive anchor is usually the entry price. A position purchased at forty-two dollars is not safer at forty than the same position purchased at forty today, but it feels that way. Round numbers, prior session highs, and the price the trader saw on a chart five minutes ago are all anchors that distort decisions about where to take profit, where to add, and when to give up.
The defense is to evaluate each price level by what is happening there now (volume, structure, time of day) rather than by its relationship to a number the trader saw earlier.
Exits clustered at round numbers or prior swing levels rather than at trader-defined targets; refusal to re-enter at prices better than the original entry.
Surfaces inside Plan Adherence and Hold-Time Discipline on the diagnosis.
If The Intelligent Investor told traders their worst enemy is themselves, Thinking, Fast and Slow is the instruction manual for that enemy. Kahneman's two systems, loss aversion, and the illusion of skill, read through a trader's lens — and each one leaves a measurable fingerprint in your trade history.
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