Recency Bias And Recent Trade Memory
A 1-minute lesson from the MarketPro academy, one of 20 in trading psychology.
Recency bias is the tendency to give recent events more weight than they deserve, simply because they happened most recently. In trading, this can mean judging an entire strategy based on its last few trades rather than its performance over a meaningful sample.
Recency bias is the tendency to give recent events more weight than they deserve, simply because they happened most recently. In trading, this can mean judging an entire strategy based on its last few trades rather than its performance over a meaningful sample.
Typical Symptoms
- Abandoning a tested strategy after two or three losing trades in a row
- Becoming overly attached to a strategy after a short recent run of wins
- Adjusting stop-loss placement based on the last trade's outcome rather than the setup's actual structure
- Believing a particular instrument is "hot" or "cold" based only on its most recent moves
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Lesson 16 of 20 in Trading psychology
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