Recency Bias
Overvaluing recent events at the expense of long-term analysis.
Beginner-friendly explanation
Recency bias is when you think that what just happened will keep happening, just because it’s recent. Example: You see a crypto rising for 3 days and assume it’ll keep going… but forget it's been dropping for 3 months.
Intermediate-level insight
This bias leads to extrapolating from recent results without perspective. It affects especially beginners or stressed traders. Example: A trader wins two trades in a row, increases the size on the third thinking he’s “on a roll”: classic recency bias.
Advanced perspective
Recency bias skews probability assessment by overweighting recent events. It disrupts statistical analysis and memory of long-term patterns. To avoid it, adopt a macro view, keep a performance journal, and focus on fundamentals. Example: A trader backtests a strategy on just 3 months because it performed well recently, ignoring 2 years of underperformance: recency bias in analysis.
Trader Psychology & Behavior
recency bias, short memory, extrapolation, analysis error, recent performance, hot hand fallacy