Recency Bias

Recency Bias

For us to be on the same page, let me quote how Recency Bias is defined in Wikipedia:  It is a COGNITIVE BIAS THAT FAVORS RECENT EVENTS OVER HISTORIC ONES whereas in MEMORY BIAS, it gives MORE IMPORTANCE TO THE MOST RECENT EVENT.   In brief, it is no less than a psychological phenomenon where a person can remember something which has happened recently.

If you are into trading, Recency Bias is your #1 enemy.  Why?  Because it tends to extrapolate the recent experiences that will happen to you in the future.  And if you are into investing and trading, Recency Bias is one of the biggest disasters that you may face because when investors try to invest, the Recency Bias skews the entire reality.

Truth is, there is always a huge gap between FACT and BIAS so our challenge now is how to overcome Recency Bias.  First off, avoid having a MYOPIC VIEW of things because that means you are constricting yourself to the four walls of the environment you're in.  And you yourself DON'T want to try SOMETHING NEW.  But since Recency Bias helps you to build your views based on the latest outcomes, try to overcome it by thinking about a bigger picture in your life.

Secondly, always try to work in with WHAT YOU HAVE IN CONTROL.  Setting realistic expectations is something that can put you down and bring false hopes in your life.  Always try to remember the fact that Recency Bias feeds into the belief that you have in your life.  

Most importantly, DON'T ever get swayed with the latest results, latest outcomes you had.  Results and numbers may seem so positive as the numbers are poppiing right in front of you.  But never forget that Recency Bias is a BRAIN ILLUSION.  Always try to understand that cyclicality comes with a lot of terrains.  There is not a smooth road that you can take to success.  Recency Bias is a brain illusion that happens when you see the latest issues.  It is your very brain tricking you into thinking that the same will happen again.  Be forewarned❗❗❗