What type of bias involves seeking information that supports one's existing beliefs while ignoring opposing data?

The type of bias that involves seeking information that supports one's existing beliefs while ignoring opposing data is known as confirmation bias. This cognitive phenomenon occurs when individuals favor information that confirms their preconceptions, leading them to overlook data that contradicts their views.

In the realm of investing and trading, confirmation bias can significantly impact decision-making. Traders might focus solely on analysis that supports their investment strategy, disregarding news, reports, or data that might suggest an alternative viewpoint. This can lead to poor decision-making and an inability to adapt to changing market conditions, as individuals become entrenched in their beliefs.

Understanding confirmation bias is crucial for traders and investors because it highlights the importance of maintaining an objective perspective and considering diverse sources of information when making financial decisions. By being aware of this bias, practitioners can strive to incorporate a more balanced view, ultimately leading to better investment outcomes.