Cognitive biases, debugging and trading
October 18, 2007
Wikipedia has a great collection of cognitive biases. Of course, the field of behavioural finance is all about how cognitive bias causes real market participants to behave differently than the rational actors of the efficent market hypothesis. Overcoming cognitive bias is a big part in becoming a good trader; Nierderhoffer and Taleb have both commented at length in their books about the psychology of overcoming biases to execute their trading strategies.
Cognitive biases are a large factor in debugging exercises too. Having written some code, it can be very hard to see why it doesn’t do what’s intended. When debugging I often exhort myself to “listen to the system.” Cognitive bias can blind one to the content of error messages. Forcing oneself to read them word by word can direct attention to a cause or symptom.