00 Behavioral Finance

Anchoring Bias in Trading

A well-documented pattern in behavioral finance, and a specific one worth recognizing in your own trading.

Short answer

Anchoring bias is the tendency to rely too heavily on an initial reference point, like a purchase price or a recent high, when making decisions, even after new information should have made that reference point irrelevant.

01 Why it happens

The first number you see becomes hard to let go of

Once a trader fixates on a specific price, their original entry, a recent all-time high, a round number, that price becomes a mental reference point that keeps influencing decisions long after it stops being relevant. A stock down 40% from its old high can look "cheap" purely because of that anchor, even if nothing about the current price reflects an actual bargain relative to the business today.

02 What this looks like

Where it shows up in real trading

Naming the bias isn't the same as catching it

See the pattern in your own trades.

PnL App logs the decisions behind every trade, so a bias like this one shows up as a real, measurable pattern instead of a feeling you can rationalize away.

03 Related

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