Recency Bias
Overweighting recent events when forecasting future price action, as if the last few candles predict the next hundred.
Recency bias makes the last few trades disproportionately powerful in your mind. After three winning trades you feel invincible and start sizing up. After three losing trades you feel cursed and either stop trading valid setups or start second-guessing every entry.
Markets cycle through regimes — trending, ranging, high-volatility, low-volatility. A strategy that crushed it for the past two weeks may be in a naturally unfavourable environment next week. Recency bias makes you extrapolate the recent regime into the future as if it will last forever.
Counteract it by tracking performance over statistically meaningful sample sizes (50+ trades), not streaks. Three wins in a row tells you almost nothing about edge. Three hundred trades does.
Related Terms
Cognitive Bias
A systematic error in thinking that distorts perception, judgement, and decision-making — markets are full of them.
IntermediateConfirmation Bias
The tendency to seek out information that supports a trade idea you already hold and dismiss evidence that contradicts it.
IntermediateDunning-Kruger Effect
The pattern where beginners overestimate their competence and experts underestimate theirs — dangerous at both ends, but especially at the start.
BeginnerGambler's Fallacy
The false belief that a series of losses makes a win 'due' — as if random markets keep track of what they owe you.
IntermediateOverconfidence Bias
Systematically overestimating the accuracy of your analysis, the reliability of your edge, or your ability to control trade outcomes.
IntermediateProbabilistic Thinking
Thinking in distributions and expected value rather than in certainties — accepting that any single trade can lose while the strategy still wins overall.
IntermediateSurvivorship Bias
Only hearing about the traders who made it — and not the far larger number who failed — leading to overestimation of how achievable trading success actually is.
Intermediate