Henry K472 Thomas

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What is recency bias in forex trading?

Recency bias is the tendency to overweight recent events compared to long-term history. For example, after a week of USD weakness, traders may assume the trend will continue indefinitely. Institutions combat this by relying on structured data models covering decades. Retail traders often overreact to short-term volatility. Benefits: responsiveness to current conditions. Risks: ignoring broader cycles leads to poor entries. The solution: balance short-term signals with historical context. Recency bias highlights the need for perspective—markets are shaped by both immediate events and long-standing fundamentals.