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Confirmation bias on charts

Nickerson (1998) describes confirmation biasOnly noticing information that agrees with you. as seeking and interpreting evidence in ways that favour what you already believe.

Lo, Mamaysky and Wang (2000) noted chart patterns are 'often in the eyes of the beholder'. If you are bullishSomeone who thinks the price will go up., you will find bullish patterns.

Antidote: write the rule down before you look, then test it, see How to test a trading claim.

Further viewing

External videos are for viewing only: we don't use them as a factual source.

External video, for viewing only▶12 Psychology Theories That Explain Why Traders Keep Making the Same Mistakes
Stick Trader · open on YouTube

Related

• Do chart patterns work? What the research says
• P-hacking and data snooping

Sources & studies

1. Lo, Mamaysky & Wang (2000), Journal of Finance (author PDF)
2. Nickerson (1998), Review of General Psychology

Trading psychologyDo chart patterns work? What the research saysP-hacking and data snooping

Last checked: 2026-11-04 · Educational, not financial advice.

Education only, not financial advice. No signals. Backtests are hypothetical: real trading can be worse. Past results don't predict future results.