Behavioral Finance Artillery Theory Chapter 1 Fundamentals of Trading Psychology 5 How to Anchor

Mondo Psychological Updated on 2024-02-02

Anchoring at the cognitive level refers to the reference point or baseline used by an individual in the cognitive process. Different anchoring styles can affect an individual's perception and judgment of things, which can lead to cognitive biases and errors. Here are some common ways to anchor:

Level of information processing: When individuals engage in cognitive processing, they process information based on their existing knowledge and experience. Cognitive biases and errors can occur if an individual uses a lower-level anchor point, such as relying on only partial evidence or erroneous prior knowledge. Conversely, if an individual uses a higher level of anchoring, such as using comprehensive evidence or correct inferences, it is likely to draw more accurate and objective conclusions.

Situational factors: Situational factors include task difficulty, motivation state, anxiety level, etc. Cognitive biases and errors can occur if an individual is influenced by situational factors such as difficulties, disturbances, or stress during cognitive processes. Conversely, individuals who maintain positive emotional states such as composure, relaxation, or concentration during cognitive processes may be better able to cope with challenges and stress, thereby reducing cognitive biases and errors.

Cognitive Style: Cognitive style refers to the way of thinking and strategies used by an individual in the cognitive process. Different cognitive styles affect how individuals process and interpret information, leading to cognitive biases and errors. For example, an individual with a strong sense of logic may be more inclined to use the method of deductive reasoning to determine the nature and laws of things, while an individual with a sensory type may be better at using the method of inductive reasoning to discover the characteristics and attributes of things.

Anchoring cognitive levels can help individuals assess their own cognitive performance, understand their own cognitive patterns and limitations, and thus adjust and optimize their cognitive processes.

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