Recency bias: what does the last trade do to the next one?

FTC Community TeamStaff92 views

The most recent outcome colours the next decision: after a win, entries come easier; after a loss, hesitation. The past trade shouldn't vote on the future one, yet it always does.

Recency bias: what does the last trade do to the next one? — drawdown and recovery diagram
An equity curve during a drawdown and its recovery

How do you counter it?

  • how you notice the last trade's influence
  • the pause you insert between trades
  • the routine that resets the slate
Recency bias: what does the last trade do to the next one? — risk-reward diagram
A risk-reward ratio of 1 to 2

The journal guide records the influence so it can be seen.

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