Recency Bias

Recency bias is the tendency to give recent events far more weight than older ones when forming expectations. After three winning trades in a row, a trader may conclude the approach is working and raise size; after a short losing run, the same trader may abandon a plan that has not actually changed. This recency effect also distorts how risk is judged — a calm month can make a strategy look safer than a longer history suggests, and a violent week can make a normal drawdown feel like a broken system. Reviewing a full sample of trades rather than the last few, and keeping a journal that spans many months, are the usual counterweights, because they force the whole record into view instead of the newest slice of it.