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Why are humans so bad at trading?

The following are the five reasons for this.

One of the biggest problems that traders may face is not knowing that there are errors that they do not know exist. Because certain human tendencies have a positive effect on your behavior. Therefore, you do not understand that they will significantly affect your bottom line.

In this article, we looked at some of the reasons why even experienced traders can trade badly. Read on to learn more.


If experienced traders start to feel too confident about trading, they are likely to end up trading aggressively or trading too much. This is one of the most common reasons why even the best traders in the world can not work.

For example, in a 1999 study, the most active traders achieved an annual portfolio return of approximately 11.4%, while the least active traders achieved 18.5%. This is just one of the indicators that we are naturally overwhelmed at some point. Some of the overconfidence bias issues are as follows:

Overconfidence bias: This is an emotional bias because professionals believe that they have complete control over their asset classes. Therefore, the result is to re-evaluate your business skills to determine a successful investment. Therefore, even the best operators in the world will be involved in financial fraud cases.

Self-attribution bias: This mainly occurs when traders attribute losses to external factors but attribute profits to their own actions. It is a form of self-enhancement or protection that can easily lead to a decrease in productivity. Therefore, by always tracking mistakes and creating an accountability mechanism to reduce them.

Bandwagon Effect

As many experts believe, the bandwagon effect is when traders believe that they must be in a trading position in order to succeed in trading. Therefore, if more analysts and traders believe that the market will develop in a certain direction, it will be profitable.

This can sometimes save you a lot of trouble. Just think for yourself and analyze the available trading signals.

Information Bias

This phenomenon occurs when traders are looking for additional information, even if the information they are looking for does not have a significant impact on the results. For traders, information bias can be harmful.

For example, if the trade is not for you, you can blame yourself for not understanding certain things. He claimed that the trade failed because he knew nothing but something he thought could be avoided.

Ultimately, you believe that by reading more materials, buying more books, and participating in more webinars, you can prevent this from happening in the future, hoping to better understand how the market works.

Therefore, we do not understand that there is no loss because we know little about the whole process. Therefore, many traders end up frustrated by the failure of the trading.

Overwhelmed by the Ostrich Effect

Ostriches tend to hide their heads in the sand so as not to realize possible dangerous situations. A good example of the ostrich effect is that smokers continue to smoke despite knowing that smoking may be malicious.

This is similar to trading. When a trader suffers a loss, he would rather bury his head in the sand like an ostrich than accept the loss and move on. What does this mean? As an experienced trader, you might think that the best way to outsmart the market is to lower the average.

Therefore, you start adding new positions to losing trades. Others will extend stop losses or even get rid of them. These are just the secrets of disaster.

Outcome Bias

People usually judge the effectiveness of a solution based on the results. We tend to ignore the process taken to achieve this result. For example, you can wake up happy and win the full prize in the lottery, but this does not mean that this is one of the smartest moves you could have made.

Outcome bias is one of the most common reasons people are hardwired to fail when trading. We trade so badly because the results force us to make wrong assumptions. For example, if you decide not to follow your trading plan and follow your instincts. But if you succeed, you can abandon your trading plan. You forget this is pure luck. Always strive to stick to your trading plan.

Wrap Up

Since people are hardwired to trade so badly, this is not always the case. You can use some of these reasons to educate yourself and make the right decision today. At the same time, you can start practicing. Reconnect your brain, think like a trader. It’s never too late to start!

Now that we accept that we are bad at trading as humanity, let's talk about how we can make money with artificial intelligence. Artificial intelligence can process much more data in a much shorter time than humans. Thus, they can open and close positions without being late for market movements. We are entering the era of trading with artificial intelligence, do not be late for this era. Meet HafizeBot and learn how to trade with artificial intelligence.


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