Recognizing Trading Bias

Bias trading is a predisposition or perspective of financial markets in which a trader believes there is an increased probability of a certain outcome compared to other possible alternatives.

This trading bias is determined by technical or fundamental factors that support certain views that explain market behavior. It is often associated with a bullish/bearish market trend indicating a suitable trading strategy and style.

Reasons Traders Need Bias

Traders need a bias to make trading decisions that align with the trader's specific strategy. The end goal is to make good decisions with real money at stake. There are so many decisions to make on every trade that it can be exhausting and often lead to mistakes.

How to Develop Trading Bias With Technical Indicators

The supporting information provided by technical indicators, such as moving averages, can help traders find trading biases.

Moving Average

Moving averages are another tool that traders can use to determine trading bias. Usually, traders use a 200 period simple moving average.

Traders can apply this indicator on any chart and see if the price is above or below the moving average. If the price is above it, traders can take the bias that the trend is up and look for opportunities to buy. Conversely, if the price is below it, the trader can say that the trend is down and has a trading bias to sell.


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