Recency Bias

Recency bias is the tendency to overweight recent information. If your last 5 trades were losers, you start thinking the strategy is broken — even though your 100-trade backtest shows you'd expect a 5-loss streak about once every 200 trades. If gold rallied for the last week, you become a gold bull — even though the bigger trend hasn't changed. Recency bias is especially destructive after losses. A few losing trades feel like a fundamental shift in the market, and traders abandon working strategies for whatever was working last week. Then they get whipsawed because the new strategy needs a sample size to prove itself, and they didn't give the old one a fair shot. The fix is statistical thinking. Track trades over hundreds of samples, not over the last 5. A losing streak is meaningful only if it's outside the historical distribution for your strategy. If your strategy has had 5-loss streaks before, this one means nothing.