Salience Bias in Trading: What It Is, How It Works, and How to Beat It

Why One Trade Feels Bigger Than It Should
(and What to Do About It)

Salience Bias in Trading

Let me ask you this:
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Have you ever heard of Salience Bias?
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Probably not, but I bet you’ve felt it, and I guarantee it’s influenced a few of your trades…
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And you know how it goes…
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If you understand WHY you feel a certain way, you can often combat it and take charge in the heat of the moment.
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So, what the heck is Salience Bias?

SALIENCE BIAS

Salience bias is basically your brain overvaluing one vivid event… and letting it hijack your thinking.

For example:

  • You remember that one trade you closed only to see it totally rip in your direction moments later.
  • That monster winner you had trading a particular setup that’s now stuck in your head.

You get the idea…

It’s your brain grabbing one strong memory and saying:
“That’s reality. That’s the truth.”

Even if it’s not really…

Think about this:

  • Overweight recent pain = you start hesitating on perfectly sound setups
  • Overweight recent wins = you get sloppy execution or oversizing
  • Overweight to dramatic news = you abandon your trading plan for “this time it’s different”
  • Seeing danger when there isn’t any = you start micro-managing and meddling with trades.

We’re humans, our brains do some weird sh*t, it’s only trying to protect us.

But in trading, often that protection gets you hurt even more!

So, how do you stop it from happening?

Well, there are some things you can do to combat it:

  1. Zoom out.
    Ask yourself, am I making this decision correctly, or am I being influenced by a memory?
  2. Stick to the plan.
    A cliche? Sure, but this is why our plan is so important. It removes any biases that might have crept in.
  3. Name the bias. 
    This sounds a bit stupid, but literally just saying “this is salience bias d*ckhead….” works surprisingly well. (Maybe without the insult…!)
  4. Use your blotter/journal.
    Keep focused on the last 20 days or trades, not just one. The more you can look at the bigger picture, the less impact one specific trade will have on your next decision.

So today, ask yourself this…

“Am I trading what I see… or what I remember?”

I found a good breakdown on Salience Bias if you’re curious → [Take a look]