Friday, March 23, 2012

Unable to hold, exiting early II - Recency Bias

Recency bias is our ability to recall recent events and experiences more readily than earlier ones. This means that anything you experience recently is likely to have a disproportionately strong impact on your decision making than older events. Recency bias is very hard to fight since its an essential part of our cognitive and learning processes.

For example, today I exited a bit earlier than I could have when I bought above b9. When the initial move off a first reversal (b9-29) is strong, you can often swing a trade till the end of the day or an obvious overshoot of the TCL. However, after adapting to the recent narrow range days, I exited at +6  right above b24 instead of my planned +8.

The permanent solution to this is to accumulate experience and develop the skill to quickly recall and adapt to changing conditions. The more experience you accumulate, the less recency bias impacts you. The tactical solution however, is to trade mechanically and stick to the plan. At the least, I should have exited on an L2 (after fL2 b21) below b30 for my swing position.


  1. Hi cadaver,

    could you tell me why you took b6 1PB? I am a little uncertain about weak b2,b3.

    Thank you very much for your reply.

    1. The signal bar b6 had a strong close, it was a BT of the open (a reliable sign of trend), a 5tf of the buys above b4. Overall, it was an extremely strong signal.

  2. Hi Cad,

    sorry what do you mean by BT in the above answer?


    1. He means that b5 tested the opening price after breaking below b1, so its a breakout test (BT)