Recency Bias

What Is Recency Bias?

A type of cognitive bias, recency bias is when an individual puts more stock into events that have happened more recently when making an important trading decision. Cognitive biases in trading have become so crucial that the US Security Exchange Commission (SEC) has a dedicated staff department just for it. This is why individuals use strategies like grid trading — to remove cognitive biases from a trading strategy.

Key Takeaway

Recency bias is a cognitive bias that states a trader puts more importance on recent occurrences than past ones when making trading decisions.

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