Cognitive Biases and Behavioural Economics
It takes the human brain three hundred to seven hundred milliseconds to identify a picture or read a word aloud from a page. We haven’t even begun to scratch the surface of the brain’s potential. However, there are many limitations to how the brain makes decisions; hiccups in our logical thinking that cause us to make unwise decisions. One such hiccup is cognitive bias. Sometimes cognitive biases help our brains process information more quickly and effectively, particularly in a crisis or tense situation where thinking faster has a direct, immediate outcome.
However, these same biases can cause us to make severe errors in judgement when we rely on them alone for processing information. A cognitive bias is a genuine failure in our thought processing – arising from miscalculations, external social influences, or personal experiences. When trading in any market, it is easy to…
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