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.
Recency Bias
Weighting recent trades or market conditions far more heavily than a longer history when judging a strategy or its risk.
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