What is “Recency Bias” and How  Can You Avoid It?..

Recency bias is the tendency for traders to focus exclusively on recent events while ignoring older data that may be just as relevant (or even more so). This bias undermines a trader’s market analysis by clouding judgment and compromising decision-making abilities. In forex markets, recency bias typically shows up when traders fixate on their latest trades and lose perspective on their overall performance.. What is “Recency Bias” and How Can You Avoid It? Recency Bias is a psychological tendency where people place too much emphasis on recent events or information, while ignoring or undervaluing older data. It’s especially common in investing, trading, and decision-making. 🔍 Example: If a stock recently shot up in price, you might assume it's a great investment just because of that recent performance — even if the long-term data tells a different story. 🧠 Why It Happens: Our brains are wired to notice recent patterns. Recency helps us process decisions faster — but not always better. We confuse short-term noise for long-term trend. ⚠️ Where Recency Bias Shows Up: Trading/investing: Overweighting recent gains or losses. Hiring decisions: Judging a candidate based on the last interview moment. Performance reviews: Remembering only the last month, not the whole year. Personal relationships: Reacting to recent arguments instead of considering the whole relationship. ✅ How to Avoid Recency Bias: Zoom Out: Look at the Big Picture Review longer timeframes (e.g., 1-year or 5-year performance). Use historical data, not just what’s trending today. Stick to a Plan Create a strategy or checklist ahead of time. Avoid impulsive decisions based on recent events. Keep a Journal or Log Document decisions and the reasons behind them. This helps you see if recent events are unfairly influencing you. Use Objective Tools Use charts, metrics, and data analysis instead of gut feelings. For traders: use moving averages, ATR, RSI, etc., to verify trends. Get a Second Opinion Ask a peer, mentor, or use software to check for bias in your reasoning. Review Past Mistakes Look at times when recent events misled your decisions. What would you do differently now? 🧭 Key Thought: "Recent doesn’t mean relevant. Step back before you step in." Let me know if you’d like a tailored checklist to spot recency bias in your trading decisions or business choices.