Thanks to regular commenter Peter MACD for the link to this article earlier. It addresses one of the biggest demons traders must slay to get and stay profitable. At the same time, it’s something no one ever totally grows out of – to be human is to make stupid decisions that you know better than to make. Here’s a more eloquent quip:
Once something is added to your collection of beliefs, you protect it from harm. You do this instinctively and unconsciously when confronted with attitude-inconsistent information. Just as confirmation bias shields you when you actively seek information, the backfire effect defends you when the information seeks you, when it blindsides you. Coming or going, you stick to your beliefs instead of questioning them. When someone tries to correct you, tries to dilute your misconceptions, it backfires and strengthens those misconceptions instead. Over time, the backfire effect makes you less skeptical of those things that allow you to continue seeing your beliefs and attitudes as true and proper.
I’m looking at you perma-bulls and perma-bears (which makes me a perma-flip-flopper?).
