I watched a trader hold through a 14% drawdown because "it was trading at $47 last month." The stock was at $41. His entry was $43. None of that mattered — he was anchored to $47 like it was some kind of gravitational law. The position eventually stopped out at $39. He'd been trading a ghost the entire time.
Anchoring bias is your brain's worst feature as a trader. You lock onto a price — usually the first one you see, or a recent high, or your entry point — and every decision after that gets warped by it. The market doesn't remember that number. But you do. And it costs you. I've done it myself: bought at $2.20, watched it run to $2.60, then held all the way back down to $2.10 because "it was just at $2.60 yesterday." My anchor wasn't my stop loss. It was a price level that no longer existed.
The turn came when I started logging every trade where I ignored my system because of a previous price. The pattern was ugly. I was making emotional decisions based on what the market used to be, not what it was doing right now. Exits delayed. Entries skipped. Risk rules bent. All because some number had stuck in my head like a song I couldn't shake.
The fix is mechanical. First, remove your position's cost basis from your trading platform display if you can — it's just noise. Second, set your stop and target before you enter, and write them down somewhere you'll see them. Third, treat every open position like you're looking at it for the first time each day: if you wouldn't enter here right now, why are you still in? This approach aligns with the concept of cognitive bias in decision-making. Mark Douglas covered this in Trading in the Zone — the market exists in the present tense, not in your memory. Your edge comes from responding to what's happening now, not mourning or celebrating what happened then. The anchoring effect is well-documented in behavioural economics, and it's just as deadly in trading. Once you recognise it, you can build rules around it. Use price alerts instead of watching every tick. Journal your exit decisions to catch yourself replaying old levels. The goal is to let each trade stand on its own risk parameters, not the emotional weight of where it's been.
This content is educational only and does not constitute financial advice. Past performance is not indicative of future results. Always seek licensed financial advice before trading.