DEFINITION

Recency Bias

Weighting recent events more heavily than historical data when making trading decisions. Causes traders to abandon proven strategies after a short losing streak.

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Related terms

Confirmation Bias

Seeking out information that confirms existing beliefs about a trade while ignoring contradictory evidence. A leading cause of holding losers and ignoring exit signals.

Tilt

An emotional state (borrowed from poker) where rational decision-making breaks down after a loss or frustration. Tilt is behind most revenge trades and oversized positions.

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