What it means
Anchoring is the cognitive bias where an initial reference point disproportionately influences subsequent judgments. In trading: the price you first bought at becomes your 'anchor' — even when fundamentals or charts have shifted, you mentally compare current price to your entry. A stock you bought at $100 that's now at $85 feels 'cheap' because of the anchor, even if its fair value is $70. Same trader entering fresh at $85 might see no setup at all.
Why it matters
Anchoring explains why traders hold losers waiting to 'get back to break-even' — the entry price is the anchor, not current fair value. The professional rule: evaluate every position as if you entered today at the current price. Would you buy here? If not, exit. The anchoring bias is so common that this single rule, applied consistently, materially improves most retail traders' P/L.
How to use it
Daily exercise: for each open position, ask 'would I buy this fresh at current price?' If no, exit regardless of entry. Use limit orders set in advance for entries — don't 'reach for the market price' because it 'feels close' to your anchor.
Want a worked example or a deeper dive? Ask Rocky how this concept applies to your specific watchlist or trade idea.
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